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DECEMBER 2014 RM7.80 (WM) RM9.80 (EM)

PROPERTY

PROPERTY OUTLOOK:

# MAGAZINE FOR

INVESTORS

2015

HOW TO GET YOUR

LOANS APPROVED THE RISE OF

CHERAS SOUTH

THE DIVERSIFIED

BUILDER Smart Niche Group off to a great start

KDN PP 18181/04/2013/(033492) ISSN 2289-4233


PROPERTY LAUNCH

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PUBLISHER’S MESSAGE Publisher KK Chua (kkchua@propertyinsight.com.my) Editor Syamil Zahari (editor@propertyinsight.com.my) Sales & Marketing Janet Loh 012-2050 911 (janet@propertyinsight.com.my) Andy Fam 012-6019 938 (andy.fam@propertyinsight.com.my) FOR ENQUIRIES: enquiries@propertyinsight.com.my

Publisher Armani Media Sdn Bhd (1032085-H) No. 32-3, Jalan Pekaka 8/4 Sec 8, Kota Damansara 47810 Petaling Jaya, Selangor Tel : +603 6156 3366 Fax : +603 6156 3399 Printer KHL Printing Co Sdn Bhd (235060-A) Lot 10 & 12, Jalan Modal 23/2 Seksyen 23 Kawasan Miel Phase 8 40300 Shah Alam, Selangor, Malaysia

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y most account, the year 2015 will remain yet another restrained year for Malaysian property investors. Following the Federal Budget which introduced stricter measures to tamp the property market, the year 2014 has already shown signs of market slowdown. Examining the recent Budget 2015 and the many analyses by experts and opinion leaders, the economic outlook for 2015 and beyond seems to be challenging. This landscape will also surely affect the property industry. Already, there are various indications for a damp outlook in property arena in 2015 resulting from cooling measures introduced by the Central Bank and the GST implementation in April next year. We can no longer be comfortable. We need to be proactive in our actions to protect our well-being in the market. All hope is not lost, however. The fundamental numbers of Malaysia’s property industry is still strong. Measures of market correction are being put in place by the Government, and we will emerge on a more solid foundation. In the meantime, it is time to re-stock our thoughts and put forth our own business strategies in order to stay ahead in 2015 and beyond. Like the saying by Confucius: “The will to win, the desire to succeed, the urge to reach your full potential... these are the keys that will unlock the door to personal excellence.” Yes, personal excellence – both in business and in life, because one is very much interrelated to the other. And part of that personal business excellence is to prepare our strategies to face what is ahead. Happy investing!

www.propertyinsight.com.my www.facebook.com/propertyinsight.com.my www.youtube.com/propertyinsightmy www.twitter.com/propinsightmy Disclaimer

Although every reasonable care has been taken to ensure the accuracy of the information contained in this publication, neither the publisher, editors, writers nor employees and agents can be held liable for any errors, inaccuracies and/or omissions. The contents of this publication do not constitute investment advice. It is intended only to inform and illustrate. No reader should act on any information contained in this publication without first seeking appropriate professional advice that takes into account their personal circumstances. We shall not be responsible for any loss or damage, whether directly or indirectly, incidentally or consequentially arising from or in connection with the contents of this publication and shall not accept any liability in relation thereto. The views by our contributors expressed here are their personal opinions and do not necessarily reflect Property Insight’s views. The publisher does not endorse any company, organisation, person, investment strategy or technique mentioned in this publication unless expressedly stated otherwise. The publisher does not endorse any advertisements or special advertising features in this publication, nor does the publisher endorse any advertiser(s) or their products/services unless expressedly stated to the contrary. All rights reserved. No part of this publication may be reproduced in any form or by any means, including photocopying and imaging without the prior written permission of the publisher.

KK Chua Publisher Armani Media Sdn Bhd


CONTENTS

24

DECEMBER 2014

DEVELOPER OF THE MONTH

SMART NICHE GROUP

PHOTO COURTESY: SNG

PROPERTY OUTLOOK IN 2015-PG 14 Experts weigh in on Malaysian property industry outlook to get investors prepared for the year 2015

VENTURING INTO THE HEART OF TEXAS-PG 56 Dallas-Fort Worth offers strong fundamentals and great opportunities for property investors

HOW TO GET YOUR LOANS APPROVED-PG 70 Industry panel address issues affecting bank loans

TOP HOTSPOTS IN MALAYSIA-PG 30 Property Insight finds out from consultants from four branches of independent real estate consultancy to see what they think and where the potential areas for hotspots are

THE RISE OF THE SOUTH-PG 50 South Cheras undergoing remarkable facelift as new developments and infrastructures keep pouring in

www.propertyinsight.com.my DECEMBER 2014 3


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EMAIL info@decentrum.com.my WEBSITE www.decentrum.com.my De Centrum is a registered trade mark under the Protasco Berhad Group of Companies. All information contained herein are intended for general marketing purposes only and should not be relied upon by any person as being complete and accurate. The information contained herein are not statements or representations of fact and are not intended to form part of any offer or contract for sale. Visual representations like pictures, art renderings, depictions, illustrations, photographs, drawings and other graphic representations and references are only artistic impressions and merely conceptual. The information on project including but not limited to the proposed facilities, measurements, distances, plans, descriptions and specifications are merely indicative and are subject to amendments by the developer without notifications as may be required by the authorities or the developer’s consultants. The developer does not guarantee, warrant or represent the correctness or accuracy of any information provided herein and does not accept any liability for negligence, error, misrepresentation, discrepancy in relation to the information or for any reliance on the information stated herein. The developer excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damage arising from it. Developer License: 10293-2/06-2016/0593 (L). Advertising Permit: 10293-2/06-2016/0593 (P). Validity: 21/6/2014 – 20/06/2016. Minimum Price: RM575,400.00. Maximum Price: RM1,259,653.00. Total Units: 320 units. Building Plan Approval No: MP.SPG.600-34/3/58 (8). Approving Authority: Majlis Perbandaran Sepang. Land Tenure: Freehold. Land Encumbrances: Charged to RHB Bank Berhad.

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NEWS & EVENT

Nation’s timber boosted by Paramount

alaysia’s rich heritage in hardwoods is given a huge boost when Paramount Corporation Berhad (PCB) teams up with Universiti Putra Malaysia (UPM) and the Malaysian Timber Industry Board (MTIB) to produce the Chengal House. The project is an 11,000 sqft clubhouse located at Sejati Residences in Cyberjaya. Launched by the Deputy Prime Minister Yang Amat Berhormat Tan Sri Dato’ Haji Muhyiddin Yassin on 21 October recently, the Chengal House is a oneof-a-kind project built using 200-year old reclaimed chengal timber as its key elements. The PCB-UPM-MTIB partnership is divided into two broad areas: property and education. In property, the partners will explore the use and application of timber in construction – not just in design and detailing, but also as a structural material. The durability of Malaysian hardwoods offers this opportunity, which few other countries can match. In education, UPM and MTIB will be working with Paramount’s education arm, Sri KDU Schools, to extend their Eco Schools programme to include the study of forests, trees and plants. Via the education programme, MTIB will also be showcasing the Chengal House to the world, as part of its efforts to tell the world of the versatility of Malaysia’s wood resources and their superior strength which makes them suitable for heavy and medium applications as well as decorative purposes, such as furniture, moulding and carved items. Chengal House is located within Sejati Residences, a low density, high-end gated and guarded development at Cyberjaya with only 249 landed

M

homes spread across 40 acres. With a concept of ‘inviting the outdoors in’, it is designed and built with environmentally friendly and sustainable concepts. Only 20 minutes from KL, it is well-connected with a good network of highways.

Tan Sri Muhyiddin Yassin witnessed the signing of a Memorandum of Understanding between Paramount Corporation with UPM and MTIB (top photo) and participated in the launch of Chengal House (bottom photo)

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NEWS & EVENT CIDB Malaysia reintroduces QLASSIC

The Construction Industry Development Board of Malaysia (CIDB Malaysia) recently reintroduced QLASSIC to the local construction world, and Malaysia’s heavy weights have pledged their “aye” to this move. QLASSIC, or Quality Assessment System in Construction, is an assessment system that measures and evaluates the workmanship quality of a building construction work based on worldwide Construction Industry Standard (CIS 7:2014). The reintroduction of this tool into the local construction world is part of CIDB Malaysia’s continuous efforts to improve quality in the field. A Memorandum of Understanding (MoU) was signed between CIDB Malaysia’s Chief Executive Dato’ Sri Ir Dr Judin Abdul Karim and the top industry players on 30 October recently. The event was witnessed by Minister of Works Datuk Seri Haji Fadhilah Haji Yusof. Among those who signed the MoU with CIDB Malaysia were City Hall, Perbadanan Kemajuan Negeri Selangor (PKNS), Sunway Integrated Properties, Metro Kajang, Naza TTDI and a few others.

Value-added offerings and benefits for licensed Real Estate Negotiators (REN)

PropertyGuru Malaysia and the Malaysian Institute of Estate Agents (MIEA) officiated their partnership through a Memorandum of Understanding (MoU) signing ceremony that is in support of the latter’s advocacy and bid to promote the need for Real Estate Agents & Negotiators (REN) to register themselves as certified agents in its attempt to regulate the standards of RENs in the property market. The partnership offers licensed REN members to enjoy special listing packages, as well as the opportunity to tap into PropertyGuru Malaysia vast network of online visitors and reservoir of market insights, as well as industry updates to better equip RENs. The collaboration also signifies PropertyGuru Malaysia’s backing for MIEA’s ongoing initiatives to educate RENs as well as consumers on the vitality of REN licensing and certification as a way forward to protect the integrity of the REN profession, as well as the local property market. This resonates well with growing number of complaints filed against RENs, with an average of 70 complaints per month and the issue is seen to be on an upward trend. PropertyGuru Malaysia country manager Gerard Kho said, “Consumers and potential homebuyers today are bogged down with various concerns and qualms over the local property market and the possibility of owning their dream home. The last thing they need is to be anxious over their RENs, and we believe the licensing and certification programme initiated by MIEA is instrumental to aptly equip RENs with both the attitude and aptitude to serve potential homebuyers.”

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NEWS & EVENT

PRISM PROPERTY SUMMIT & EXPO SHINES Annual event poised to be the nation’s premier property event for real estate professionals and investors

P

roperty Investment Summit and Expo (PRISM) 2014, Malaysia’s largest property summit, proved a huge success for organiser Armani Media. The flagship event was held at the Malaysia International Exhibition and Convention

We hope those who have attended PRISM 2014 have benefitted by getting great tips and tricks of the trade in order to forge ahead despite the predicted cooling climate - chua Centre (MIECC) on November 1-2 and attracted a yet higher attendance of 3,000 participants compared to last year’s 2,108 registrants, all eager to solicit advice from industry professionals for the expected tough year ahead for the property market. “After the Budget 2015 reading in October, many among investors and developers alike have striven to understand the financial impact to their investments

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NEWS & EVENT seasoned millionaire investors, all generously sharing their experiences and advice. Headlining the summit was Dr Dolf de Roos, author of New York Times best seller Real Estate Riches and 52 Homes in 52 Weeks. Said de Roos, “The

and businesses,” Armani Media Chief Executive Officer KK Chua said. “We hope those who have attended PRISM 2014 have benefitted by getting great tips and tricks of the trade in order to forge ahead despite the predicted cooling climate,” he added. In his opening ceremony speech, Chua said, “Already, there are various indications for a damp outlook in property such as the cooling measures introduced by the Central Bank and the GST implementation by April next year. Like I said before and what I will continue to say, we can no longer be comfortable. We need to be proactive in our actions to protect our well-being in the market.” Looking ahead, Chua said, “We are already in the last two months of the year, and for many, this is the time to re-stock our thoughts and put forth our own business strategies in order to stay ahead in 2015 and beyond.” Featured in the two-day summit were talks and panel discussions by 15 speakers ranging from property gurus, loan specialists, legal experts and

The expo is the signature property event of the year. The participation of so many developers makes it a great opportunity for Malaysians and overseas investors to take an exclusive first look at newly-launched and award-winning developments from all over Malaysia. We’re confident that there is something for everyone at this event.

– De Roos

expo is the signature property event of the year. The participation of so many developers makes it a great opportunity for Malaysians and overseas investors to take an exclusive first look at newly-launched and award-winning developments from all over Malaysia. We’re confident that there is something for everyone at this event.” Other speakers of the summit included CBRE Executive Chairman Christopher Boyd, MIEA

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NEWS & EVENT

President Siva Shanker, Ho Chin Soon Research Director Ishmael Ho, real estate lawyers Elizabeth Siew and Chris Tan, REI Group of Companies CEO Dr Daniele Gambero and many others. The event’s attendees enjoyed talks covering a wide array of topics ranging from investment strategies, solutions to better financing, investment hotspots to property market outlook. Also useful were the presentations laden with useful advice on the local and international property market as well as effects of the policies introduced, such as the most anticipated GST implementation next year. Other interesting topics included tips to make the banks say yes, how to qualify a deal, how to start investing when short on cash and many others. There were more than 15 speakers from various backgrounds and expertise. This annual Expo offered a unique chance for Malaysian and International investors alike to see the country’s best upcoming property developments all gathered under one roof. 60% of the expo featured Malaysian residential, commercial, industrial and retail developments by some of the nation’s most prestigious developers like LBS Bina Group, Country Heights Holding Berhad, MCT Consortium Berhad, OSK Property, UMLand, YBK Group, Sunsuria Berhad, Ayala Land, DA Land, Tropicana Property,

Bandaraya Development Berhad (BRDB), Protasco Berhad, and Primarc Development. PRISM 2014 participant KK Teh was appreciative of the forum. “The event is an informative event that gave in depth updates on current property market movements,” the full-time property investor said, but wished that the speakers were given more time for their slots. Muhd Salahuddin Shaar, also a full-time investor, praised PRISM 2014 as a good event that combined knowledge with property developers’ showcasing and selling properties. “The talks were good as they [speakers] covered topics mentioned in the recent budget,” he said. “There are many good property deals still available out there,” Salahuddin said, “It is simply a matter of looking for them for those whom are truly interested.” Miss Yassy K, a corporate training consultant and property investor, said, “The event was interesting and time saving with several developers showcased under one roof, making it convenient for property comparisons to be made. “The talks provided by the PRISM speakers were informative as well as enlightening as it gave ease with regards to making investment decisions.” She added, “Property prices in certain soughtafter areas may continue to prosper or at the least maintain their value. Other areas where demand is lower and supply is higher for example where there is an excess in high rise property, prices might dip in areas such as these.” PRISM 2014 is Armani Media’s annual event. The company also holds many property road shows and study tours among which include the IPC Shopping Centre Property Showcase, Tropicana Property Fair, The Cyberjaya Property Study Tour and the Terengganu Property Showcase. PRISM is poised to become the country’s most exciting annual show in property industry, providing consumers and real estate professionals with a onestop-shop opportunity to explore, invest and benefit from the best deals. See you again in PRISM 2015!

10 DECEMBER 2014 www.propertyinsight.com.my

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FEATURE

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FEATURE

PROPERTY OUTLOOK IN

2015 By: Syamil Zahari

Boyd

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n Greater Kuala Lumpur, there are seven million inhabitants in 2014, up from 900,000 40 years ago, with 1.8 million homes and seven million registered vehicles. Employment in the area stood at 2.5 million jobs in 2010, and is targeted to increase to 4.2 million jobs in 2020. “So you can imagine the logistics and infrastructure that this demands,” said CBRE Malaysia executive chairman Christopher Boyd. For instance, Boyd explained, the government is working on a RM50b MRT Sungai Buloh-Kajang line 141km, currently under construction. In addition, a RM7b LRT extension linking existing suburbs is also under construction. “If you are looking for a residential property to invest, do get a hold of these plans, [and] do study the areas that will be best served by all these infrastructures,” Boyd advised. He also highlighted a few major developments in the pipeline: the RM26b Tun Razak Exchange with 70 acres of masterplanned financial centre just outside the existing golden triangle, the RM5b Warisan Merdeka’s 118-storey building next to Merdeka Stadium, the RM30b Bandar Malaysia project, the 22-acre Pudu Jail Development, the 3,155-acre Kwasa Damansara, the RM 15b

Naza KL Metropolis and the Jalan Cochrane development, to name a few. For 2015, in the KL residential market, Boyd said, “we all know that has softened in response IR Yeow Thitmarket Sang to the cooling measures introduced by last year’s Budget. Because DIBS (Developers Interest Bearing Scheme) was taken away, there was a new focus on secondary markets because financing for these properties became pretty much the same deal as financing new properties.” He added, “We have already heard complaints from developers that sales this year has been tough, and many developers tell us cynically that they have to sell every property twice because the first buyer can’t get his mortgage.”

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FEATURE However, Boyd pointed out, the Greater KL residential supply has actually been dropping since 2006, while the demand is robust yet. “You’ve got the pressure of demand from young, employed people, waiting and saving to buy a property at the right time. Nobody is going to wait forever,” Boyd

I think developers will become impatient to launch developments. Probably by first quarter of next year, there will some very successful launches and this will encourage developers to turn on the tap a little bit more and come back into the market next year. – Boyd said, and he believed in 2015 the secondary market is going to start creeping up. While total incoming residential supply increased by 8.5% in 2013 for Greater KL, new completions and new starts decreased by 13.8% and 18.3% respectively compared to 2012. “Of course, more supply will stabilise prices to some extent, but at the moment there is actually more demand than

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FEATURE

supply,” Boyd said. “I think developers will become impatient to launch developments. Probably by first quarter of next year, there will some very successful launches and this will encourage developers to turn on the tap a little bit more and come back into the market next year. I think, for next year, I’m not pessimistic. I think it’s going to be quite a strong market with a number of new developments and new phases coming into the market. And we may by the middle of next year be on a moderate growth curve once again, despite GST and the rest of it.” Malaysian property still enjoys strong demand, according to Boyd, and it has generally trended up over the past five years. The residential market is still not volatile, and the steady demand is driven by a focus on home ownership, as well as favourable demographics and affordable prices. In the later months of 2013, the percentage of loan approvals to applications dropped to 49%, “which was a pretty miserable number,” Boyd admitted, “But we note that the first half of this year, it has risen to 52%.” This could mean that the consumers are not going around applying for loans anymore, said Boyd,

“but I think the quantum of money approved hasn’t dropped, which is a good indication that the market is still very solid.” For 2015, Boyd expects increased competition among developers. “Developers are turning to smaller, niched projects…that require less capital, and therefore you have many new entrants in the

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FEATURE Faizul

market.” He added, “Developers are becoming more selective, with better market research, more tuned in and turned on to what the consumer wants and there are a lot of efforts being put into delivering values for money.” In essence, Boyd believed the fundamentals for the Malaysian property market are still very strong. “We’ve got a young, industrious population, almost full employment,” he said. “I don’t think this is the time for pessimism.” Boyd’s sentiment was echoed by property guru and author Faizul Ridzuan. “If you look at loans applied for Q3 2013 and Q4 2013, the loans applied dropped by 8%. Commercial experienced more slowdown, a 19% drop quarter-to-quarter,” Faizul said. “So the overall loans applied went down by 12%.” However, surprisingly, loan approvals for residential has only dropped by 1%, Faizul pointed out. For commercial properties, while the number of people interested in applying for loans has dropped by 19%, loan approvals actually only dropped by 3%. “So in term of overall approval, it is only a 2% drop,” he said, “So, to me, this is a clear indicator that interest in properties has gone down a bit.” Examining the Q3 loan approvals, with RM38b loan approval in 2011, RM38b in 2012, RM46b in 2013, and RM45b in 2014, said Faizul, “In my opinion, our peak cycle for property market was back in 2013. We are experiencing a slowdown, without a doubt, but because the interest is lower. But the slowdown is not as bad as people think.” Property transaction will go down further, but property value will rise, he believed. Three indicators, in his opinion, point to a healthy 2015.

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First is the national jobless numbers. “If you look at our unemployment rate, as of now, it’s at an all-time low – it’s less than 3%,” he said, reasoning that “when people have jobs, they will have income. If they have income, they will able to buy properties. If you look at income per capita, it’s actually increasing. So in that sense, we are quite healthy.” The second indicator is the strength of the banks. “If you look at non-performing loans (NPL), it is at 1.4%. This is very, very, very low. Our loan-todeposit ratio is actually better than when it was in 1997-1998. In 1997-1998, it was 1:1, which means that if a bank has RM1, it’s lending out RM1. If you cannot pay, then the bank will fail. Now, the banks are lending less than their deposits.” Looking at consumer deposits in 2009 versus 2014, too, the overall numbers have gone up 16%, Faizul explained. “So while we have a growing household debt, which has been repeatedly highlighted, we also have growing deposits. Bottom line is that there are a lot of people with a lot of cash.” His third indicator is the movement of interest rate. “Interest rate was highest during the financial crisis of 1997-1998,” Faizul said. “The reason we went through a property crash in 1997, among other things, is that we drastically increased the interest rate. As long as that is not happening, and it doesn’t look like it will, we’ll be quite okay.” Meanwhile, according to Boyd, remarking about the KL office market outlook in 2015: “Are we oversupplied? Yes, a little bit. Is it going to get worse? Yes, a little bit.” The total office supply stands at 95.5 million sqft in Greater KL as at Q3 2014, and future supply at 23 million sqft by end-2017, “which is, yes, more than we need but not dramatically so. There really were times I’d seen vacancy rates at 30%, but at the moment we are at 15-16% and we figure it won’t go above 20%. So it’s not life-threatening.” A very important statistic small investors need to

While we have a growing household debt, which has been repeatedly highlighted, we also have growing deposits. Bottom line is that there are a lot of people with a lot of cash. – Faizul

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FEATURE

know is that, of the 23 million sqft office space that is being developed, about a quarter of that is in the small office format – SOHOs, SOVOs, and so forth. “If you’ve got one of these, and it’s nearing completion, you’ve got to think very hard whether you want to sell it and whether you are prepared

to hold onto it for medium term, and you’ve got to ask yourself whether it is really going to let for office space or can it be also adapted for residential occupation,” he said. In terms of retail space in 2015, according to Boyd, “it is expected that the best-located and performing malls will sustain, while others will have difficulty maintaining performance levels. While retail continues to be a preferred sector for both local and foreign investors, but few assets are available for sale. The suburban retail market has become much more competitive, and focus has shifted back to the city centre market.” However, net revenue for most centres are impacted by service costs are going up due to rising utility costs and the spill over effect of other increasing costs. “With recent increases in gas, electricity and other costs, hike in interest rates in July 2014 and GST to be implemented in April 2015, retail spending is unlikely to grow significantly. This will have an impact on the overall retail market, and those centres able to best match offers with consumer demand will thrive,” he reported.

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EXPERTS COMMENTS

Strategies for Malaysian Property Arena IN 2015 TIME TO BUY

Milan Doshi

Property Investment Guru, Certified Financial Consultant and Best Selling Author

2015 will be a challenging year. The global economic situation is experiencing a slowdown and it is becoming tougher to get bank loans in Malaysia. I expect that there will also be a massive pre-GST sale of big ticket items followed by a period where people may only make few transactions as buyers may need some time to familiarise with GST implementation. Personally, I am planning to follow Warren Buffet’s advice of “Being fearful when others are greedy and to be greedy when others are fearful.” The best time to enter the property market could actually be after the GST comes in particularly with the secondary and auction markets. Hence it is now the time for you to get your bullets (cash) as well as borrowing ability ready! It is also a good idea to dispose of any under-performing properties prior to GST implementation.

YEAR OF CONSOLIDATION

Stephen TIew

Director of Axis Reit Berhad

I expect 2015 to be a year with potential minefields. It began this year with the Central Bank’s measures to cool down the market, government intervention to protect local home buyers, the implementation of GST and finally the Asian Economic Community Initiative, amongst others. My discussions with many senior businessmen seem to point to a slowing of consumer demand when GST is implemented, the impact of which can cause a chain-reaction.   The ASEAN Economic Community (AEC) is an initiative likened to the ASEAN version of the European Union.  Some of its earlier endeavours may involve the opening up of cross border professional practice. You can expect foreign consultant’s to start opening Malaysian branches and likewise, Malaysians going abroad to set-up branches of local organizations. 2015 is also unlikely to be a year where prices carry on a steep upward in momentum. Rather, it may be a year of consolidation, therefore purchase property only if you must.

BE IN THE KNOW

Keegan Tan

Founder of Freemind Works and Property coach

In Penang, we have observed that the number of property transaction has reduced quarter-to-quarter; however, the value of the transacted properties has increased. Despite the cooling measures, the property price is still on the uptrend, and with the impending GST implementation, I foresee will push the property price higher. While we see challenging times ahead, there still are gems to be found, and the trick is really to hone our skills to be better and smarter investors to differentiate a gem from a dud. This would include educating ourselves, staying abreast of the latest news in the market, not only pertaining to properties but also the economies of the area we plan to invest in. My plan for 2015? That would be to focus in and around the growth areas. As investors, we need to always be on the ground and keep updated with the latest economic, infrastructure and policy development that will directly and indirectly impact the property market. In short, we need to be a specialist and to be in the know before we put our money in any investment.

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DEVELOPER OF THE MONTH PHOTO COURTESY: SNG

By: Aidil Mohamad Noor

A

t rare times, we encounter developers who strive to achieve greatness in building up their name and reputation. Such company is Smart Niche Group (SNG), a joint venture of two companies (Rivertree Group headed by Dato’ Simon David Leong and Imaxland Sdn Bhd headed by Dato’ Dr Colin Lee), from an idea birthed by the two good friends with completely different background but with two common passions: responsible property development and drive for excellence. A relatively new developer, Smart Niche Group has roots that began after the development of Tropicana Medical Centre in 2005 where Dato’ Simon worked with Dato’ Dr Colin Lee. Dato’ Simon is an engineer by profession who graduated from the world renowned Imperial College of London where he obtained a First Class Honours Degree besides also bagging the Sir Bruce White Prize on his graduating year. He was a Chevening Scholar, being part of the Chevening Scholarship Scheme awarded by the UK Government internationally. He later obtained his Dato’ Simon David Leong next to Sutera Pines scale model

MBA via a part-time programme with The University of Hull while working. “Dato’ Dr Colin is an old friend of mine and he is a world renowned Fertility Specialist specialising in In-Vitro Fertilisation (IVF) and is known for founding Damansara Women’s Specialist Centre and Tropicana Medical Centre which was subsequently publicly listed in Bursa as TMC Life Sciences Berhad,” recalls Managing Director and CEO of Rivertree Group Dato’ Simon of his partner. “Besides being a passionate doctor, he is extremely passionate in property development owning, designing, building properties locally and overseas including but not limited to the development of Tropicana Medical Centre in Kota Damansara where I worked with him.” says Dato’ Simon. They both invested in land and properties together as joint venture partners. By the end of 2010, Dr

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DEVELOPER OF THE MONTH

THE DIVERSIFIED BUILDER Smart Niche Group off to a great promising start

Lee had sold his shares in TMC Life Sciences Berhad and from here, they both decided to venture in a more serious manner into property development, which inspired them to establish their own company and eventually led to the joint venture that created Smart Niche Group. What is unique about Smart Niche Group is that its well-diversified group of stakeholders. They consist of quantity surveyor, medical doctor, town planner, telecommunication engineer, civil engineers and many more. It is a company who takes in ideas from people of different backgrounds, creating a fresh idea and unique developments which can set them apart from other developments. This is similar to the approach adopted by Goldman Sachs, one of the top merchant bankers in the world, who ropes in even psychologists and rocket scientists into their financial team. “We here in SNG is similar in that our products are a result of brainstorming among individuals

ranging from a top medical doctor to engineers, town planners, quantity surveyors among others. We bring more than 30 years of design, planning, construction and project management expertise to the table,” says Dato’ Simon with pride.

FUTURE DEMANDS “One of our biggest challenges is, really, the perception by public. Certain people perceive us as a new kid on the block, with one of the shareholders being a medical doctor turned developer,” says Dato’ Simon. The truth of the matter is in fact far further than it seems. They themselves have had extensive developments experience of their own, according to Dato’ Simon. “Yes, the company itself is new. But the team that makes up the company ranges from people from many years of experience,” he adds. The company may only be new in name but the people within are proven veterans.

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DEVELOPER OF THE MONTH THERE WILL ALWAYS BE A DEMAND FOR PROPERTIES, BE IT RESIDENTIAL (LANDED OR HIGH RISE), COMMERCIAL OR INDUSTRIAL AS LONG AS THERE IS NO WAR OR FAMINE. THE CHALLENGE IS WHICH TYPE AND WHEN. THAT IS, WE HAVE TO FORESEE WHAT KIND OF PRODUCT THE MARKET WANTS IN THE FUTURE AND PLAN FOR IT NOW. – DATO’ SIMON

believes that they have to develop and deliver, and results so far have been encouraging. “We managed to achieve 100% booking of our first block in a few months. Now we are opening the second block for booking. That can be considered as ‘okay’ for what people call ‘a new kid on the block’,” he adds, smiling. As for challenges in the property market, Dato’ Simon thinks that developers have to improvise and plan developments to meet future market demands. “There will always be a demand for properties, be it residential (landed or high rise), commercial or

The Forest walkway

“For example, my high-end bungalow development under my flagship company Rivertree Group and Dato’ Dr Colin’s Tropicana Medical Centre under TMC Life Sciences Berhad,” Dato’ Simon adds. Not only that he had his own development before, Dato’ Simon started his own business in construction back in the 1999, and his passion in property development gradually lead him to vertical integrate into the property development sector in 2009. The company bought many bungalow lots in Setia Eco Park and Tropicana and they developed high end bungalows with lift and swimming pool based on a build-and-sell concept. “Total GDV for the boutique bungalow development was approximately RM70 million”, says Dato’ Simon. In countering the perception problem, Dato’ Simon

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DEVELOPER OF THE MONTH The pool

PHOTO COURTESY: SNG

industrial as long as there is no war or famine. The challenge is which type and when. That is, we have to foresee what kind of product the market wants in the future and plan for it now,” Dato’ Simon explains. For example, some developers foresaw the high-end residential wave coming in the mid-2000s onwards, and they benefited from the wave. Some foresaw high-end landed bungalows as the in-thing eight years ago and started planning for it early. Today, the wave is no longer in high-end housing but rather in affordable homes. PHOTO COURTESY: SNG

Dato’ Simon thinks that Malaysia will one day have many developments that cater for the intergeneration needs when families, while raising their own children, will opt to take care of their aging parents. “It is a fact of life. Sooner or later, our old-aged will not have anyone taking care of them due to the hectic lifestyle in the city, since it’s becoming a norm for both the husband and wife to be working,” he says. The social norm of Malaysians is that we would rather not put our parents in a nursing home facility, and developments that can address these family and social needs will be in great demand in the coming future, Dato’ Simon has no doubt. “One interesting development which we are currently planning for is a mix development comprising of commercial, residential, hospitality together with intergenerational development components and services to cater for the old age. This development when materialised will have a GDV in excess of RM1 billion.”

MARKET CONDITIONS The recent cooling measures introduced by the government such as tightening of lending by banks are something that is expected, according to Dato’ Simon. “It is definitely a healthy move for Bank Negara to curb over speculation. We as developers will have to work twice as hard to filter the good, healthy buyers from the pool of buyers that have registered with us,” Dato’ Simon shares his take. “In Malaysia, we buy many properties, and that leads to household debt getting a bit too high, and Bank Negara is getting worried about it,” he adds. He also adds that with the implementation of the GST, they are definitely going to see increase in property prices in the years to come. It is inevitable that the additional cost borne by contractors and developers will be passed on to buyers, eventually causing property prices to move upwards. For the younger generation, their affordability to purchase a first home will get tougher and tougher, Dato’ Simon believes. “Every ringgit we earn is buying less and less of everything. Land costs and construction costs are going higher at a rate that is way faster than the increase of salary of the ordinary man on the street,” he observes. “The best way to fight inflation is to own properties and getting passive income to sustain our lifestyle. I hope our Government will continue to pursue programmes like PR1MA to assist our GenYs to own their first homes because they are going to need it.”

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DEVELOPER OF THE MONTH Facilities area

PHOTO COURTESY: SNG

MAIDEN PROJECT With aim to cater to a wider swath of citizens other than its residence is Smart Niche Group’s maiden project, Sutera Pines, a residential development on a 6.52-acre piece of land with a density of 65 units per acre. It consist of two blocks of condominiums: a 12-storey (Block B) and a 20-storey (Block A), with a car park and facilities podium in the middle serving the two blocks. The development offers 424 units. Block A comprises of 297 units, 16 units per floor and catered by 4 lifts. Block B has 127 units with 12 units per floor and catered by 2 lifts. The facilities also include swimming pool, badminton courts, multipurpose hall, squash courts, barbeque area, jacuzzi, sun deck and floating gymnasium. There are also eight units of shop houses called shoplex with more than 100 available car park spaces to cater for residents as well as outside visitors with a separate dedicated entrance different from the condo residential entrance. This shoplex will not only serve residents of Sutera Pines but also the public living in the vicinity that do not need to go to Sungai Long to do their shopping. “Not to forget, a nature park or hill comprising about 1.5 acres of natural area which we have dedicated to the residents for their relaxation, jogging, tracking, etcetera. We also have a Canopy Health Garden for those health conscious residents,” Dato’ Simon adds.

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What sets Sutera Pines apart is that it is the first condominium development next to Twin Palms by Lum Chang, one of the few luxury-gated guarded developments in Cheras area. Another important part of it is that Sutera Pines is away from the traffic jam within Sungai Long. It has a serene environment with nature right at the homeowner’s doorstep. “Those who know Sg Long will know this. There are two traffic lights from UTAR Sg Long coming out to SILK Highway, and that traffic lights can get you stuck for five to seven minutes. We’re away from that. People want to live close by to their The entrance

PHOTO COURTESY: SNG


DEVELOPER OF THE MONTH Living room

PHOTO COURTESY: SNG

workplace, and want to live in serenity away from the traffic. That’s what we’re providing them with,” Dato’ Simon explains. A closer look at Sutera Pines reveals that the project well-connected by several highways: LEKAS, SILK, KL-Seremban, Cheras Kajang, SKVE, and Kajang Seremban. Being slated in the south, their connectivity via Cheras-Kajang Highway into KLCC is about a 27-minute drive, a 25-minute drive to Mid Valley and 27-minute drive to KL Sentral. Towards Putrajaya, Cyberjaya and Bangi, it is about 27-minute drive via SILK Highway. In terms of nearby facilities and amenities, Sutera Pines is of close proximity to many retail buildings. There are two Aeons within a 6km radius, which are Aeon Cheras Selatan and Aeon Mahkota Cheras, and Mines Shopping Centre is just within a 10-minute drive. Also in about 15-minute drive is Cheras Leisure Mall. As for medical care, there are two hospitals within close proximity: Columbia Asia Hospital is just 6km away and Sungai Long Hospital is 5.3km away.

I SEE MALAYSIA LAGGING UNIQUE PROJECTS TO SERVE THE NEEDS OF THE PEOPLE AND I HOPE SNG CAN FILL IN THE GAP TO DO SUCH A SERVICE HAVING IN GROUP A DIVERSIFIED GROUP OF TRAINED PROFESSIONALS PLUS BUSINESS ACUMEN.

In addition, Sutera Pines is seven minutes by car from the future 20,000 student campus of UTAR which will be ready by 2016 where these students not to mention their teachers and university staff would require housing. “The location is very preferable, with campus coming up, and also, Sg Long is quite a close proximity to Kajang, Putrajaya, and Cyberjaya,” Dato’ Simon mentions. As for Sg Long’s growth alone, this area is one of the fastest growing areas in Selangor. “If you notice, there are a lot of MRT Stations being stationed around this area. About 10 to 20 years ago, people here were not from high earners. But that has changed now. They are getting wealthier by the day, and their affordability level is getting higher,” Dato’ Simon says. Sutera Pines is only a start, and Dato’ Simon has confidence on Smart Niche Group’s opportunities to carve its name and making an impact on socially responsible developments. “I see SNG developing unique mixed developments that comprises of products that the market needs not only for sale but as a service to Malaysians as a whole. “I see Malaysia lagging unique projects to serve the needs of the people and I hope SNG can fill in the gap to do such a service having in Group a diversified group of trained professionals plus business acumen,” he concludes.

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FEATURE

TOP HOTSPOTS IN MA

O

ften we regard Greater Kuala Lumpur as the property area where most people would invest in or even work and stay in, but there are other the top hotspots throughout Malaysia for investors to venture in. Property Insight finds out from consultants from four branches of independent real estate consultancy Knight Frank Malaysia, Associate Director and Project Marketing and Residential Agency Herbert Leong, Resident Director of Penang Branch Tay Tam, Associate Director of Sabah Branch Ginn Lai, Resident Director of Johor Branch Ricky Lee and two representatives from LaurelCap Sdn Bhd, Stanley Toh Kim Seng and Alexander Lee, to see what they think and where the potential areas for hotspots are. First, let’s see what is in store for us in Lembah Klang:

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1. Kajang/Semenyih The southern Klang Valley is getting quite popular nowadays, especially the Kajang/Semenyih area due to the MRT Line currently in construction, which helps in terms accessibility towards Kajang, according to Herbert Leong. To date, media Night view of Kajang

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FEATURE Shaftsbury Square

MALAYSIA reports indicate that more than 40% of the MRT construction has been completed. Kajang/Semenyih connectivity is also enhanced by highways such as Kajang Dispersal Link Expressway (SILK), Kajang–Seremban Highway (LEKAS) and Sungai Besi Expressway (SBE). Another reason behind Kajang being popular is

its availability of landed houses, the most sought after type of residential properties. Kajang is also boosted by its short distance to Cyberjaya. “Because of the close proximity, people are going into the south since the house price is still lower. It goes without saying that when the price around Cyberjaya increases, people choose to live nearby, if not inside,” Stanley Toh adds.

2. Cyberjaya “Cyberjaya basically have the infrastructure ready. It has good connectivity and is nearby a major town,” Toh explains. It is connected to Putrajaya and Shah Alam by major highways such as DamansaraPuchong Expressway (DPE) and South Klang Valley Expressway (SKVE). “Also, MRT 2 Line will have its station in Cyberjaya,” he adds. As for completed station, Cyberjaya and Putrajaya shares an Express Rail Link (ERL) provided by KLIA Express. Another factor that attracts investors is the completion of retail outlets in Cyberjaya such as Shaftbury Square.

Lakeside view of Cyberjaya

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FEATURE Currently also under construction is the IOI City Mall. Toh believes that with the completion of IOI City Mall and its opening in 2015, although not directly located in Cyberjaya, will help attract even more population into the area. Cyberjaya is also nearby Puchong, so whoever is late to enter the market in Puchong will eventually venture to Cyberjaya as a place to live.

Tanjung Tokong

3. Sungai Buloh Again, MRT Line takes its place in booming the growth of an area. With its construction of MRT Sungai Buloh-Kajang Line, Sungai Buloh has made it into the list of top hotspots. Also, its connectivity with Kota Damansara plays an important role, for Kota Damansara is where commercial retails such as Giant, Carrefour, Sunway Giza are located, along with international school such as Sri KDU International School, and for medical needs, the Tropicana Medical Centre. Sungai Buloh is also within close proximity to Subang Airport. Jalan Sungai Buloh is a busy road with vehicles constantly cruising through between the Subang Airport and Guthrie Corridor to Sungai Buloh town and the North-South highway.

4. Shah Alam In Shah Alam, highway plays an important role of its development, specifically Damansara-Shah Alam Elevated Expressway (DASH). “DASH will improve congestion and enhance connectivity which will support developments in the vicinity,” Toh explains. The expressway will exist as an alternative route for Persiaran Surian at Kota Damansara which has capped its road capacity. It will become an alternative and easier route to the airport when Subang Airport becomes the main low cost carrier terminal in 2015. Also not to forget that RRIM’s development in the area is expected to increase population by 300,000,

this will cause congestions to the existing routes and DASH is going to be one of the solution.

5. Tanjung Bungah/Batu Ferringhi

Let’s go up and visit the land of Penang. Explaining for the north sector is the Knight Frank Malaysia’s Resident Director of Penang Branch Tay Tam. Who provides us with another four hotspots to look at. Tam’s explanation about the Tanjung Bungah/ Batu Ferringhi is simple: “It is traditionally a much sought after area,” he says. The reason why people like the area is due to the coastline view of Tanjung Tokong–Tanjung Bungah–Batu Ferringhi coastal line. Toh adds that this area is seen more as a retirement spot or holiday homes. The price is quite George Town, Penang

Sunway Giza

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FEATURE Batu Kawan

high for the area that is about half an hour drive from the city, for RM1,000-plus per sqft. “People living in Penang are quite different from people living in KL. For us, we can absorb the idea of driving for 30 minutes to get to work but for them, it’s a long drive already. So local market will not be going into Tanjung Bungah much since they don’t prefer that,” he mentions.

6. Georgetown George Town is in itself a unique blend of the old and the new that is acclaimed by ECA International as the most liveable city in Asia, on par with Kuala Lumpur. In addition, the city, which has received World Heritage status from UNESCO, is praised of being one of the ‘10 Islands to Explore Before You

Die’ by Yahoo! Travel. For Tam, Georgetown is a popular area for investors interested in hotels and conservation properties. Also, after the inscription of the George Town UNESCO World Heritage Site, heritage enthusiasts and foreigners are snapping up properties within the heritage zone, particularly within the buffer zone, where the laws on renovating properties is not as strict as within the core zone. With such accolades, George Town, the capital of Penang has put the state on the world map.

7. Batu Kawan Batu Kawan is an area which is only starting to boom, mainly because of Penang Second Bridge. The area was not brought up before and is quite a remote area since it is like an island of its own, separated by a river. Now that the connectivity to the island is improved, Batu Kawan has started to attract the attention of developers and investors altogether. The sentiment is echoed by Toh. He also adds that not only Batu Kawan, the surrounding area will also see boom happening as when the land gets scarce, investors and developers will start to go into nearby area. “Penang Second Bridge really helps in boosting the accessibility and visibility of Batu Kawan. It was just a remote area before, but since the bridge is launched, the area started to boom. That goes to show how important accessibility is as to play the role of making an area into a hotspot,” he adds. Toh also says that serious property players are coming in hard; for instance, a project by Ikano will bring the only other IKEA Malaysia besides the one currently in Damansara.

8. Bayan Lepas/Relau/Sg. Ara/Batu Maung “These areas are popular with those working in multi-national companies in the Free Trade Zone

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FEATURE bolstered by the close proximity to the second bridge,” Toh says. Penang Second Bridge helps much in boosting the connectivity from the mainland to island to Batu Kawan and these areas. “These are the areas that got the spillover effect from Batu Kawan,” Toh explains. Ever since Penang Second Bridge was opened, what once took about one hour to reach to the bridge is now reduced to only about 15 minutes of travel. Much like Batu Kawan, these areas are the areas where their accessibility is improved drastically, making it into a sought after area.

9. Medini@Iskandar, Johor

Medini@Iskandar being part of ‘Flagship B: Nusajaya’ is a well-planned integrated township development spanning 2,230 acres, occupying slightly less than 10% of Nusajaya’s total land area. “It offers special incentives to approved developers, approved development managers, IDRstatus companies, investors and foreign knowledge workers, which include tax exemptions up to year 2020, flexibility on employment and administration of foreign workers and exemption of EPU property acquisition guideline,” explains Ricky Lee. Positioned as the Central Business District (CBD) of Nusajaya, the outstanding development in Medini is dominated by numerous key players/developers from both the local and international scene. These include WCT Group, Mah Sing, Sunway, Zhuoyuan, Distincti, MCT Group, BCB, Metrolink, IOI Medini,

Penang Second Bridge

UMLand, Link Group, Sunsuria Group, Kimlun Corp Bhd, Singapore’s Tang Group and more recently, the presence of China developers. “But, since the presence of Chinese developers who develop in bulks with thousands of units offered, the developers are now in safe zone where they are a bit cautious as to develop in Iskandar,” Toh adds. The proposed construction of Coastal highway southern link, connecting Medini to second link expressway, is expected to benefit properties within the locality in terms of capital value and marketability, while at the same time sending a strong message to investors on the Malaysian government’s determination to transform Iskandar

Medini@Iskandar

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FEATURE Kota Kinabalu

Malaysia into a liveable city and a thriving investment destination. “The high speed rail will be a major game changer for Iskandar. I hope to see this rail be used for people who lived far from KL, but will still work in KL in the future,” says Stanley Toh.

10. Kota Kinabalu, Sabah Last but not least, we go across the sea into Sabah and Sarawak where Ginn Lai and Alexander Lee share with us what is in store for Kota Kinabalu, Sabah. “The fundamentals supporting growth in the Sabah property market have never been stronger,” Lai explains. Over the last few years, Sabah and in particular its capital Kota Kinabalu has experienced rapid transformation across many key economic sectors. Tourism in Sabah has enjoyed double digit growth rates and stands for the highest tourist spend nationwide. Crude palm oil production remains the highest in Malaysia, whilst agriculture and aquaculture industries continue to bolster the state’s GDP. In the oil and gas sector, Sabah represents the highest crude oil reserves in Malaysia and with new deepwater discoveries, will increase the country’s reserves of crude oil and natural gas. Performances across these industries have been a catalyst for urban and rural property development, both for domestic demand and the increasing number of expatriate relocations to Sabah. “What was once a destination only loved by locals and eco-tourists, Sabah today is well on its way to becoming Jesselton Quay, an international hotspot for travellers and savvy investors, blessed with an equatorial climate of year long summer days, amazing sunsets and virgin beaches, the world’s oldest rainforests and cool mountain ranges.

It’s hard for Sabah not to be on the radar of neighbouring Asian cities, most of which are within a five hour direct flight of the state’s gateway Kota Kinabalu,” says Lai. Starting from a lower capital value base, availability of financing, low interest rate environment, and a transparent legal and title system, Sabah is quickly gaining regional interest from major real estate developers and investors. As the rest of developed Asia struggles with heated property markets, Sabah is at tipping point with a confluence of Borneo’s unique offerings and strong property drivers. Lee, who is handles the territory of Sabah for LaurelCap, explains that Kota Kinabalu is like a smaller KL. Residents brought in their experience of city living from KL into Kota Kinabalu and they are now trying to emulate the city living style of KL, which is why we see more of strata development. “The population is increasing due to the development and people from small towns choose to migrate into Kota Kinabalu,” he concludes. An elevated road at Kota Kinabalu

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FEATURE

THE BEST MONEYMAKER With many perks in store, property remains the top choice of investment for a lot of people

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FEATURE agricultural, REITs, bonds, Certificates of Deposit and Treasury Bills could you buy? Well, the truth is simply the amount that you have invested; and in this case it is RM100,000 only.” However, de Roos adds, “With property investments, you could go on to purchase properties with much higher value than the amount of money you have in your hands. For example, with RM100k you could purchase a RM1 million real estate with a 90% mortgage. This is how you get to leverage on your cash.”

S

mart investors make their money work for them, not the other way around. By doing so, ultimately, they get to grow their money and achieve financial freedom. But, how do you do this? The answer is to opt for investments. Investments come in many forms, which include properties, commodity futures, stocks, bonds, Real Estate Investment Trusts (REITs) and more. But what makes property investment the most preferred and profitable investment in the long run compared to a few other types of investments? Leverage is one reason. Author of New York Times bestseller Real Estate Riches and world-renowned property guru Dr Dolf de Roos explains, “Let’s say you have RM100,000. How much money or what would be the value of oil investments,

Even with a modest 50% Loan-to-Value ratio, an investor could purchase a property that is worth much more than the money invested, which could also then be used to refinance for cash. “When other investments hike up in value, investors usually tend to sell them to realise profits made. However, with property, you don’t have to sell it once its value goes up. Instead you can refinance the property to pull out its equity, tax free,” de Roos shares. But de Roos cautions that property purchasing can go two ways: one where investors find themselves purchasing a property much lower than its actual value and the other where they purchase a property a lot more than it is actually worth.

When other investments hike up in value, investors usually tend to sell them to realise profits made. However, with property, you don’t have to sell it once its value goes up. Instead you can re-finance the property to pull out its equity, tax free. - de roos www.propertyinsight.com.my

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FEATURE “A property may be worth RM1 million, yet you could pay anything between RM800,000 and RM1.5 million for it. Factors that buyers should consider into with cases like this include the condition, enhancements, furnishings and fittings provided as well as the view that the particular unit gets,” explains de Roos. Another benefit of property investment is weathering periods of recession. According to online investment portal Idlwave.org, investors with a larger sum of cash to spare could purchase bigger homes that would go for lower rates during periods of recession. These properties can be rented out to tenants and investors could make money out of the rental collected. This method of investing can really help generate income during recession periods without investors having to work much at all.

“Another property worth investing in is rental space storage,” the portal recommends. “If you have a space that can be rented out for this purpose it would be of utmost popularity during recession periods as many people would simply want to store some excess possessions of theirs when downsizing their homes during periods of recession.” Adding to that the website also explains, “Selfstorage investment trusts rose up a whopping 30% four years ago,” hopefully assuring investors of better returns in the future for this sort of investment. Lance Roberts, CEO and chief strategist for Streettalk Advisors in Houston adds in Fiscal Times, “If you’ve ever had to put your stuff in storage, you will most definitely understand how some renters leave items in warehouses for decades which can become a long term investment for those whom own these spaces.” Argues Roberts, “It doesn’t matter where you live,

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people simply don’t want to move their belongings once it has been placed in storage.” In light of this matter, some key pointers to look out for when purchasing a recession-proof property include firstly choosing a correct location to invest in. “Location matters most as you can rebuild a property but you cannot move the land that you own as you wish,” the website 4realestateinvesting.com explains. “A favourably located piece of land would always go up in value, sell faster and usually for a better price,” it adds. Investors should also always opt for properties that hold a broad appeal as the website explains, “Homes supporting the broadest appeal

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FEATURE

hold a best value for a long period of time.” The property investment website adds, “Home owners should also always remember that an attractive bathroom and kitchens can especially boost the price of a home. Future buyers truly appreciate updated homes with open and spaced out layouts couple with state of the art appliances.” This brings up yet another benefit of property investment: upgrades. According to de Roos, with other types of investments, one cannot do anything to directly increase the values other than hope and pray that the investment appreciates. “With a property, there are many things that you

can do to massively increase its value without spending much cash,” de Roos says. Investing in property also allows investors to do simple improvements such as giving their property a new coat of paint, adding fittings as well as air conditioners and built-ins to add more value to the acquired estate, so it could fetch a higher market rate.

Asset commodities In comparison with property investments, investments made in stocks, oil and agriculture such as crude palm oil (CPO) are more volatile as these investments are more liquid. CPO, for instance, depends greatly on weather and inventory as well as movement in other plant prices. Speaking to Property Insight, an analyst of RHB Investment Bank Bhd said, “Oil prices are driven by many elements including demand and supply, speculation and geopolitical events just to name a few. REITs and bond investments are similar, as they offer fixed deposit-like returns.” The type of investment in which one chooses to go with truly depends on investor risk appetites as well as the asset-commodity cycle, the analyst explains. “Property investment usually offers steady appreciation and decent rental yield, unless located in an unfavourable location,” the analyst

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FEATURE

adds, cautioning however that due to large rental appreciation amounts, this sort of appreciation may be harder to liquidate.

Stocks, shares and bonds Other alternatives to property investment are stocks, shares and bonds. Those who invest in these types of ventures put their money on a brand or company rather than the physical asset itself. Investments such as these depend on how long a brand can continue to prosper. This is different than property investment. “The first thing is that property investment is a tangible investment. You put in your money into something that you can see, feel, and touch. You own the building or unit, be it landed or stratified,” says B.I.G. Plots chief executive officer Tan Hwa Chuan. With stocks, shares and bonds, however, an investor shares it with other stakeholders being

a stakeholder means that you own part of the whole company, while for property investment you get to be the sole owner of a physical asset. Stocks, shares and bonds are a form of passive investment since investors cannot really control how the company moves about and have to wait for dividends to increase over time. Tan explains that for property investment, the value of properties purchased will likely appreciate over time, “Say that when a property is appreciated by 10%, you would already have made 100% return, considering that you are eligible for 90% loan and only need to pay 10% of down payment. This is a good way of leveraging your money.” In stocks, shares and bonds, there is always the main issue called the ‘roller-coaster-movement’ in its pattern of price, Tan explains. This is what disturbs most investors. With investments in stocks, shares and bond, prices can experience extreme fluctuation in just a manner of days, or even minutes. Without proper knowledge in stocks, shares and bonds, often investors made the mistake of buying at the wrong time and hence experience losses.

Gold Gold is yet another type of investment. Unlike cold hard cash that is subject to currency exchange rate, the market value of gold is the same all over world. Ten grammes of gold in India has the same value as 10 grammes of gold in China. But 10,000 Rupees is not the same as 10,000 Reminbi. “Like property investment, gold investment is a long term investment. However, gold price

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FEATURE appreciates at a much slower rate than property and investors cannot get passive income out of it compared to rental property investment. While gold might just be suitable for investors with limited fund, the return is small too,” Tan comments.

REITs REIT investments, on the other hand, are for those who enjoy reaping the benefits of the property industry but would like to invest in smaller bite-sized amounts. “An REIT is usually a corporation, trust or association that owns and in most cases operates income-producing real estate and/or real estate related assets,” explains author and former Wall Street bond trader Brian O’Connell in investment portal Investopedia. “Modelled after mutual funds, REITs pool the capital of numerous investors. This allows individual investors to earn a share of the income produced through commercial or real estate ownership, without having to go and buy or finance property or assets.” He adds, “REITs differ from traditional real estate investing, primarily due to the fund-heavy strategic asset flow, versus the traditional free, more direct access flow from real estate investing such as becoming a landlord or buying stocks from homebuilding companies.” O’Connell however also mentions that property still remains the better investment due to some key factors: “In property, you call the shots. There aren’t any fund managers to be answered to and the best part, you decide on how much a given property should rent for.

Like property investment, gold investment is a long term investment too. However, gold price appreciates at a much slower rate than property and you cannot get passive income out of it compared to property investment. “Adding to that, property investors can also decide on the number of properties they wish to own or purchase as well as decide solely as to whom may rent and live in the property that you own,” O’Connell says. “Taxations are also much reduced in property investment while returns reaped are also much larger,” O’Connell states. He concludes, “Like any investment, the more money you invest, the more money you may earn. Therefore, in this case, a property investor would earn a higher return as the invested amount of cash would usually range in hundred thousands while REITs investments usually hover in the mere thousands.” Having looked at several popular investment options it is clear that property investments, though harder to begin due to higher pricing, ensures steadier and larger returns for investors. It is also important that property investors carry out due diligence such as researching on the areas that they wish to invest in and perhaps upgrading their properties to ensure a steady returns and higher rentals rates for the properties they own.

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TIPS

10 SIGNS OF PROPERTY FLIPPING DISASTER In property investments, one uses the keep-or-flip strategies. Knowing when to flip is an advantage but if you are not too certain, check out some early warning signs to save you tonnes of money.

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TIPS

I

n 1H 2014 the Real Estate and Housing Developers’ Association Malaysia (REHDA), through its Property Industry Survey, states that there will be a total of 15,820 new residential and commercial units launched into the market by year-end. More than half – 10,189 units – were actually launched in the first six months this year. This is despite the number of unsold units in the affordable housing range (under RM1m) being rather high at over 30%. What these numbers are saying is that there will be more supplies available in the property market. REHDA’s survey also finds that local buyers are leading the current property market (80% of total purchases), and of that figure, 85% are buying for self-dwelling. This may boost the confidence in most investors as it signifies the demand for property is still fundamentally solid. More and more investors (or speculators) may be taking the opportunity to engage in flipping strategy since property prices are expected to become relatively more attractive to them. If you are thinking of using the flipping strategy, look out for all early warning signs that a flipping deal could potentially go south before it happens, regardless of market situation. Here are clues that you might be walking into a nightmare of a deal that could cost you tens of thousands, if not millions.

1. YOU ARE TRYING TO FLIP A PROPERTY ALONE

Property investment is a team effort, especially when you want to flip a property in the shortest time. Of course you can do it alone, but this is definitely not

the best option. In fact, not having a team increases the chances of your flip being a flop, more so than if you are new to the industry. The minimum requirement here is to have at least six months spent in networking and forming relationships with important team members. Your team members should include at least the following experts: 1. 2. 3. 4. 5.

Lenders/bankers Property agents General contractors Certified accountants Conveyancing attorneys

2. YOUR VALUATION IS FROM GOOGLE

Trying to estimate the value of a property by merely doing an Internet search is one way of setting yourself up for a disaster. It is always best to meet and speak with local experts like property agents and other investors. A real estate agent who knows a lot about the area where you want to purchase the property would be in a better position to give you a more accurate estimation.

3. YOU ARE USING “ERASER MATH”

When you get too excited about a property flip and then try to adjust the numbers to suit your situation, it can get you into trouble. It is just like using an eraser to erase away those numbers not in your favour and then rewriting them to get some numbers within your own expectation. These numbers will tell you nothing except the fact that you are too optimistic over the

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TIPS A REAL ESTATE AGENT WHO KNOWS A LOT ABOUT THE AREA WHERE YOU WANT TO PURCHASE THE PROPERTY WOULD BE IN A BETTER POSITION TO GIVE YOU A MORE ACCURATE ESTIMATION. profit picture. If you find yourself trying to adjust the numbers so that they can look good on paper, that is likely a sign that you are about to get into a bad deal. The reason is very simple, a good deal will intrinsically give you a “Wow” from its most conservative numbers.

4. YOU HAVE INVESTED ALL YOUR LIFE SAVINGS IN THE FLIP

The higher the risk, the greater the reward, right? But are you willing to take the risk with your life savings? If you want to invest money in real estate, you should consider using some OPM (Other People’s Money). You can always find people around you who are looking to invest by networking and forming relationships. It could be your friends and family whom you trust most. Get investors interested by offering them good deals. No one will give you their hard-earned money if you are the only one benefiting from it.

5. YOUR DEAL DOES NOT HAVE AN EXIT STRATEGY

Anything can go wrong when investing in a property. Without an exit strategy, you might find yourself trapped. Some of the exit strategies you can employ in flipping a property include: 1. Renting to a tenant 2. Wholesaling to another investor 3. Using it for yourself If none of the exit strategies mentioned above is feasible or that you cannot plan one, then you should let the deal go.

6. YOU ARE MANAGING RENOVATION WITHOUT EXPERIENCE

Some people believe that renovating a house or apartment involves just putting on a new coat of paint, fixing a light or two and they can then sell the property for a profit. They may think they know a lot of things but what they do not know is

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that not everybody can renovate a house without any experience. If you try to renovate a property on your own and you do not know what you are doing, you are basically taking a risk of renovating the property improperly. As a result, a number of problems can happen. One is that you may find it difficult to get a buyer later. If you do not have a clue how to renovate a property, find someone who does. There are plenty of talented contractors who are good at their job; you just have to find and meet them.

7. YOU THINK THE INVESTED CAPITAL IS INSIGNIFICANT

Nobody gets serious about anything that is deemed insignificant. When you are not serious about it, you tend to overlook a lot of things. Capital required for some flipping deals may not be a big sum if you are able to secure a mortgage loan. But the risk you are taking is in fact higher than losing the capital sum because of the leverage effect of finance.

8. YOU ARE FINANCIALLY OVERSTRETCHED

If you are flipping a property using mortgage loan, be sure you are not overstretching yourself. We introduced the 30-60 Rule of Property Financing (in “Are You Financially Overstretched in Property?” published in October 2014 issue of Property Insight) as a simple guideline to check if


TIPS already has better advantage. Always watch out what you say. So try not to brag especially on social media platforms such as Facebook. You might assume the rules of property flipping apply to everyone but you due to something called “I-am-different effect” by telling all your stories or bragging of your success. You might hear about studies of people not being as great at investing as they think they are, but you do not think that applies to you. Avoid falling into this trap by consciously looking to consider the opposite of what you think might be true. If you think flipping a particular house would make a huge profit, look for evidence that it will not.

10. YOUR GUT TELLS YOU OTHERWISE

one is financially overstretched: • •

Pay no more than 30% of household income for home mortgage Keep instalment of investment property lower than 60% of income generated by the property

This rule can also be applied to property flipping with slight modification. If you are buying an incomplete property which is not generating any income, it should be considered as part of your existing home mortgage. In other words, total instalments for both your existing home and the uncompleted property should not be more than 30% of your household income. Otherwise you can consider yourself overstretched.

9. YOU ARE OVERCONFIDENT

People are overconfident in just about everything. Because of some previous successful investments, you might think you know more than the market about a particular deal and invest heavily in it. What you might not realise is that others in the market

Investing in real estate comes with a lot of fear, but with a few tips you can easily overcome it. However, if you have an overwhelming sense of fear about purchasing a property, then you probably should not have started it. You should acknowledge that there is a possibility you are in over your head if your instinct constantly tells you that the deal might not work out well. One typical symptom is you do not dare to tell anyone about the deal you are going to dive into.

WHAT WARNING SIGNS HAVE YOU SEEN BUT PERHAPS IGNORED? As REHDA has discovered also, some 31% of properties in the RM500,001 to RM1m range were still unsold after completion in the past three years, largely in more popular property markets like Selangor and Johor. For properties in the price range of RM250,000 to RM500,000, 34% of the completed units were unsold, located mainly in Perak and Pahang. So which way would you think the price of property will go? Well, it is up to you to speculate, isn’t it? But before jumping into any flipping deal, if you have noticed any of the above signs, please make sure your insurance can cover you against highprobability, high-cost man-made disasters.

ABOUT THE CONTRIBUTOR KC Lau is a serious financial educator. He has published 6 books and co-created a dozen online financial courses. Dr Ong Kian Leong is the master trainer of online property investment course Property Method and a property blogger. Both KC Lau and Dr Ong are co-founders of Property Method.

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AREA FOCUS You City by PJD Regency

RISE OF THE

SOUTH

South Cheras is undergoing remarkable facelift as new developments and infrastructures keep pouring in

By: Aidil Mohamad Noor

C

heras South, the area mainly situated in the border of Cheras and Kajang, was originally referred as Balakong until the name “Cheras Selatan� or Cheras South came after a new commercial hub Jusco Cheras Selatan opened in December 2006, and the name stuck. During its time as Balakong in the early 80s, it was just a village divided by Sungai Balak, surrounded by rubber plantations and disused tin mining lakes. The majority of the residents were rubber tappers. There was a primary school, a few Chinese temples, a wet market, a Lutheran church on a hilltop, a cowboytown street, a town hall and a football field.

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In the 1990s, Taming Jaya developed rubber plantation opposite the village into a small-industry area and housing estate. During the development of Taming Jaya, the locals said that the developer had rebuilt the Balakong road into a two-lane highway from Mines Wonderland to Cheras 11th mile. Later, from behind the village, Taman Connaught also had a road connecting it to Cheras.

Explosive growth Cheras South today is one of the more exciting locations with ready highways such as SILK, Grand Saga Cheras-Kajang, LEKAS, and with an MRT station under construction. Research by Mitraland in 2009 showed that Cheras South has a population of approximately 300,000 and it estimates that the

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AREA FOCUS Vina Versatile Homes@Cheras

CEO of Mitraland Chuah Theong Yee

Cheras South will not so much be a capital city, but it will be a regional hub complete with commercial, shopping and entertainment convenience within the vicinity. - Chuah population is experiencing an annual increment of 5%. “There are around 380,000 residents now and the number is vital in ensuring an area’s sustainability,” says Mitraland Group chief executive officer and founder Chuah Theong Yee who is well-versed in Cheras South and its potentials. Compared to other investment in Kuala Lumpur (KL), Cheras South is considered a low entry with high potential capital appreciation and rental yield.

Lake Vista Residence

In terms of price appreciation in the last two years, Chuah illustrates, “Our Livia Service Apartment @ C180, the first stratified development in Cheras South was launched at RM290 per sqft in early 2012 for 551 sqft. Now, the sub-sale price has went up at approximately RM600 per sqft with rental of RM1,400 monthly with partially furnished, which is equivalent to 10.5% rental yield.” In term of price, “the estimated current land price for landed property now is at RM350 to RM400 per sqft, a small-sized high-rise apartment is from RM500 to RM600 per sqft and for shop office the price is around RM600 to RM700 per sqft,” explains Chuah.

Exciting developments Among the developments currently going on in Cheras South is by Mitraland itself, Vina Versatile Homes @ Cheras. The project, launched in June 2013, comprises of three blocks of condominiums with a total of 472 units sitting on a 7.5-acre freehold land next to Bandar Tun Hussein Onn Secondary School. Vina sets itself apart from other residential developments with its unique recreational park that boasts a resort-like recreational pool, four acres of green deck, 60% of greenery and landscape area, floating cabanas, 610m jogging track/forest walk, an aqua gym and many more. The project is expected to see its completion in 2016. Another development is by PJD Regency at Batu 9 named ‘You City’. The mixed development project is undergoing construction on freehold land and, as its name implies, is almost a city by itself with a total of 20.6 acres nestling with residential units and retail shops. Phase 1 consisting of You Residences, launched in August 2012, and the sister project You Vista launched in January 2013. You City features four blocks of three different layouts

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AREA FOCUS Cheras Leisure Mall

which are Executive Suites at 1,033 to 1,073 sqft, Family Suites at 1,026 to 1,311 sqft and Dual Key Residence at 1,744 sqft. The project targets its completion in July 2016. Selangor Dredging Berhad (SDB) also plays its part in developing Cheras South. One of their projects in Cheras South is named ‘Windows on The Park’ located in Bandar Tun Hussein Onn, one of the main towns in Cheras South. The project was launched in July 2012 on an 8.9-acre freehold land with 4.2 acres of landscaped parkland. The project features three blocks of high-rise condominiums with a total of 540 units and built-up ranging between 916 sqft to 4,311 sqft. Yet another project located in Cheras South

is Lumiere @ Bandar Tun Hussein Onn by OCR Property. Lumiere villas and condominium development is spread across 6.12 acres of land in a quiet yet convenient township. The development offers 384 exclusive units. The low-density condominium development features spacious units measuring from 1,271 sqft to 1,391 sqft in size. With only six units per floor, the condominium offers privacy and exclusivity. Lumiere also offers doublestorey villas comprising 4+1 bedrooms complete with private gardens and private garages with roller shutters to accommodate up to four vehicles at a time. The villas offer grand spaces measuring from 2,604 sqft to 3,097 sqft in size. The project is scheduled to complete in 2017. Lumiere

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AREA FOCUS Prices of Residential Properties Price Range (RM)

Type

Location

AverAge Land Area (m2)

AverAge Floor Area (m2)

2012

2013

Average Price Change (%)

Single Storey Terrace

Bandar Tun Hussein Onn

133

68

260,000 – 334,000

220,000 – 365,000

+2.4

One and a Half Storey Terrace

Bandar Tun Hussein Onn

143

98

300,000 – 350,000

350,000

+7.1

Double Storey Terrace

Bandar Mahkota Cheras

100

111

350,000 – 398,000

355,000 – 405,000

+4.1

121

128

315,000 – 465,000

380,000 – 480,000

Stable

Double Storey Medium Cost Terrace

Bandar Mahkota Cheras

100

111

350,000 – 398,000

355,000 – 405,000

+4.1

121

128

315,000 – 465,000

380,000 – 480,000

Stable

Low-Cost Flat

Bandar Mahkota Cheras

-

61

74,000 – 77,000

75,000 – 89,000

+11.1

Bandar Damai Perdana

-

60

77,000 – 90,000

83,000 – 90,000

+4.5

Bandar Mahkota Cheras

-

89

160,000 – 200,000

160,000 – 225,000

+6.7

Bandar Tun Hussein Onn

-

78

115,000 – 240,000

130,000 – 250,000

+3.7

-

80

NA

170,000 – 200,000

ND

-

103

240,000 – 280,000

275,000 – 300,000

+9.3

-

113

NA

305,000 – 330,000

ND

-

107

190,000 – 252,000

210,000 – 258,000

+7.8

Apartment

Condominium

Bandar Mahkota Cheras

Town House

Bandar Damai Perdana

Rental of Residential Properties Price Range (RM)

Average Rental Change (%)

Average Gross Yield (%)

800 – 850

+6.6

+2.5

800 – 900

900 – 1,000

+11.7

+2.8

60

350 – 450

400 – 450

+6.0

+8.9

70

500 – 650

500 – 650

Stable

+4.0

Location

Average Floor Area (m2)

2012

2013

Bandar Tun Hussein Onn

153

750

Bandar Mahkota Cheras

137

Low-Cost Flat

Bandar Mahkota Cheras

Apartment

Bandar Mahkota Cheras

Type

SOURCE: NATIONAL PROPERTY INFORMATION CENTER

Double Storey Terrace

Price of Commercial Properties Type

Location

Average Land Area (m2)

Average Floor Area (m2)

2012

2013

Average Price Change (%)

Mahkota Walk

153

279

1,560,000 – 1,630,000

1,600,000 – 1,850,000

+8.5

Double Storey Shop

Bandar Mahkota Cheras

153

271

1,550,000 – 1,830,000

1,600,000 – 1,850,000

+5.8

Bandar Mahkota Cheras

153

439

1,535,000 – 1,600,000

1,750,000

+11.6

Mahkota Square

142

416

NA

2,250,000 – 2,400,000

ND

Three Storey Shop

Price Range (RM)

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AREA FOCUS

Cheras South Average Condominium Price (RM/sq ft) Q3 2014,378

400 350

Rental (RM/sq ft)

300 250

Q2 2013,278 Q3 2011,184

200

Average

Q4 2011,190

150

100

Q3 2013,332

Q4 2012,258

Q2 2011,141

50 0 2011

2012

2013

2014

Source: Propwall.my

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AREA FOCUS One of future launches in Cheras South is Lake Vista Residence by UDA Land, a condominium project in Bandar Tun Hussein Onn comprising of a total of 250 units. Lake Vista Residence offers set of facilities like swimming and wading pool, sauna, gymnasium, outdoor shower, multipurpose hall, BBQ area, sundeck, green area, game room and cafeteria. The built-up area for the project starts from 1,049 sqft to 1,367 sqft, with the price range yet to be announced. Another new launch is by Adenland (Cheras) Sdn Bhd called 9INE, a freehold condominium project in Batu 9. The project features a 23-storey main tower with 224 units of uniquely designed residence and three blocks of 4-storey villas with 32 units of luxury villas. It promotes resort living environment and promises 7-tier controlled security system.

Plenty of amenities and facilities “Cheras South is now a mature township which is accessible via major highways and easy access to various shopping malls such as Aeon Cheras Selatan, Cheras Leisure Mall, Mines Capital Mall, Aeon Big, Cheras Central Mall and also Giant,” Chuah tells. This shows how Cheras South residence will have no problem in leisure shopping. As for connectivity, it is accessible via major highways such as SILK Highway, Grand Saga Highway, East-West Link, Cheras-Kajang Highway, MRR2, and MEX. In terms of public transportation, the underconstruction MRT from Sungai Buloh to Kajang is coming up. There will be two stations located in Cheras South, namely in Bandar Tun Hussein Onn and Balakong. As for existing stations, though not in Cheras South per se, Serdang KTM station is of Mines Resort & Golf Club

Cheras LRT Station

close proximity to Cheras South, about 15-minute drive. As of leisure activities, there is Selangor Turf Club for racing enthusiasts, along with Palace of the Golden Horses, a hotel located within Mines Resort City. Cheras South is the home of two international schools, Australian International School Malaysia and Alice Smith School. As for local schools, there are three schools situated within Bandar Tun Hussein Onn: Sekolah Kebangsaan Bandar Tun Hussein Onn, Sekolah Kebangsaan Bandar Tun Hussein Onn 2 and Sekolah Menengah Bandar Tun Hussein Onn. For higher education, there is a nursing and health science college Masterskills located right inside Mahkota Walk in Bandar Mahkota Cheras. “Cheras South will not so much be a capital city, but it will be a regional hub complete with commercial, shopping and entertainment convenience within the vicinity,” Chuah says. He also anticipates that with the completion of MRT line within Cheras South, the land price will further escalate and more high-rise residential will enter the market, since the lands for properties are getting scarce. The strata developments will be a replacement for landed property which is always the main supply in Cheras South as of today. Selangor Turf Club

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INTERNATIONAL MARKET

VENTURING INTO THE HEART OF TEXAS Dallas-Fort Worth offers strong fundamentals and great opportunities for property investors

By: Nancy Choy

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INTERNATIONAL MARKET

I

t is without doubt that the key factor to look for when purchasing a property, whether for investment or for one’s abode, is LOCATION. Just as for the end user, this is even more so for the property developer, and of utmost importance to one who is developing properties in the international market. Much research has to be done in selecting the country, region, and area to develop in. With its vast experience and connections, Singaporebased A2A Capital Management Pte Ltd, (A2A), an international developer of residential properties in North America, is now focusing on residential development in the state of Texas, USA, and in particular, in Dallas-Fort Worth.

Why Texas?

TIME magazine in its October 28th, 2013, article touts Texas as the ‘Future of America’. With the stagnation of the income of the American middle-class and the increased costs of living in the established population centres in the US such as the high-tax and high-cost

states of California and New York, many of American’s middle and lower-middle classes have in-migrated to Texas for a better quality of life. The lower costs of living, lower house prices, cheaper produce and gas, increasing availability of jobs, and warmer climate have attracted many Americans to relocate here. It is cheaper to live and thrive in Texas. Cheaper land and labour, lower taxes (no State tax, only Federal tax, and no tax for Goods in Transit), laxer regulation, pro-business policies and initiatives targeted towards attracting new businesses, such as the USD$3 billion (RM10.01b) Texas Enterprise Fund, have also contributed to a business-friendly climate in Texas, luring many including Fortune 500 companies to set up businesses here. This translates to an ever increasing supply of jobs.

Economy and jobs

With USD$1.39 trillion, Texas has the 2nd highest GSP (Gross State Product) in the US, just behind

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INTERNATIONAL MARKET

California (USD$2.0 trillion). Its GSP has increased by an astonishing 353% in the past 21 years. Based on its GSP, if Texas were a country, it would be the 8th largest economy in the world. Also, based on figures from the US Bureau of Labor and Statistics, 2013, Texas is the leading state in the US in terms of job creation. From about mid-2012 to mid2013, jobs created in Texas contributed to 12% of all the jobs created in the US nationwide. Texas ranks fourth in the US for highest job growth in June of this year, according to a Prudential Texas Properties report. From 2001 to 2012, the number of lower-middle-income and upper-middle-income jobs in Texas grew by 14.4% and 24.2% respectively. In this same period, for the US, without Texas, the number of lower-middle income jobs would have only grown by a pale 0.1%, and the number of upper middle-income jobs would have shrunk by 6%! In addition, from 2002 to 2011, with 8% of the US population, Texas created nearly one third of the country’s highest paying jobs.

Population growth and housing market

From 1990 to 2011, Texas accounted for the highest population growth among all the states, at an annualized rate of 2.44%, twice the national average of 1.20%. Even after the most recent recession, when several areas experienced a decline in population due to people moving elsewhere to find jobs, the population growth in Texas remained strong. Texas is America’s fastest growing large state, with three of the top five fastest growing cities in the country, Austin, Dallas, and Houston, according to Forbes. According to the US Census Bureau, since 2000, one million people have moved to Texas from the other states, than have left. It also has a younger demographic, creating a more productive and consumption-driven economy, and a growing need for homes. It is no wonder that many migrate to Texas. With USD$300,000, one can only get a 19.5 sq-m loft

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apartment with one bath in San Francisco, California, or a 45.7 sq-m one-room and one-bath apartment in Brooklyn, New York; for the same amount of money in Austin, Texas, one can get a 283 sq-m four-room, three-bath house. Texas has weathered the real estate crunch without significant damage to property values. Home prices

SOURCES: BUREAU OF ECONOMIC ANALYSIS, US CENSUS BUREAU, CIA FACTBOOK, METROSTUDY, DALLAS ECONOMIC DEVELOPMENT, IHS GLOBAL INSIGHT

Within the first half of 2014, the DFW economy has shown more economic growth than the Texas state average, with employment opportunities surpassing every major metro area in the state.

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INTERNATIONAL MARKET continue to rise at a healthy pace, with an increasing median price up by 13% in 2013 from 2012. Home ownership rates in Texas remain stable at 64.3% as of 2011. This is essential for the sustainment and growth in demand for new residential units in the state.

Why Dallas-Fort Worth?

The Dallas Fort Worth Metroplex (DFW), consisting of the cities of Dallas and Fort Worth, is a metropolitan area in North Texas which serves as the region’s economic and cultural hub. With over 6.6 million residents, it is the largest metropolitan area in Texas, the largest in the South, and the fourth largest in the US.

Economy/Business/Jobs

With a GMP (Gross Metropolitan Product) of USD$420 Billion, DFW would be the 18th largest economy in the world, if it were a country. Within the first half of 2014, the DFW economy has shown more economic growth than the Texas state average, with employment opportunities surpassing every major metro area in the state. DFW not only outperforms its state of Texas in job growth, it also leads the US in job growth rate. It registered a 3.1% growth year-over-year as of end-2013, according to US Bureau of Labor Statistics. Employment has increased 4.5% this June, compared to the 3.4% increase in the state of Texas, according to a Federal Reserve Bank of Texas report. According to a Moody’s Analytics study, seven of the top ten cities for projected job growth through 2015 will be in Texas. And we know that Dallas and Fort Worth will be two of these seven cities, as they are part of the five major cities in Texas which sustain the growth of the whole state, with the other three cities being Houston, Austin and San Antonio, all collectively forming what is known as the Texaplex. This is no surprise as many of the large national and multinational companies, especially those dealing in

logistics, manufacturing, warehousing, and transportation, are expanding their operations or relocating to DFW, taking advantage of certain tax exemptions such as the exempted ‘goods-in-transit tax’, the pro-business climate, lower setup and operations costs including lower purchase and rental costs, and the lower cost of living in the state of Texas. DFW is also equidistant to North America’s five largest business centres of New York, Chicago, Los Angeles, Mexico City and Toronto. It offers an extensive transportation network, allowing businesses to distribute their products to 98% of the US population within 48 hours by truck or rail. The area that most of the companies are expanding and moving to is the Alliance Corridor or Alliance Texas, a 17,000-acre development in Tarrant County, located in far north Fort Worth. Alliance Texas has over 320 companies with over 31,000 employees. The corporate residents there include FedFex, UPS, GM, Ford, Lockheed Martin, AT&T, Bridgestone, AIG, Citibank, Deloitte, JCPenny, and many more. Walmart Stores is doubling its distribution capabilities with its second major distribution center at Alliance Texas, a USD$32 million 850,000 sqft facility on 50 acres of land. Toyota and Amazon recently opened their distribution centers there, with Amazon occupying a 1-million square feet warehouse. GE has also moved their manufacturing plant, and will be moving their entire operations here by next year.

Population Growth & Housing Market

DFW, the fourth largest metropolitan area in the US, is currently leading the nation in population growth. With over 6.5 million in population, DFW accounts for over 25% of the Texas population, and it is expected to outpace larger metropolitan areas in New York, Los Angeles and Chicago in the next 28 years, with an increase of over 60% to over 11 million. This increase is due to the huge increase in job growth, the low cost of living and higher quality of life, hence attracting people from other states to move here.

Population and housing growth

The rising demand for housing in the DFW area is a direct correlation to the increasing employment opportunities that have arose as more companies expand and relocate to this area. Based on a Metrostudy report, the number of home building permits issued to developers in DFW grew 19% in 2013, while new homes sold surged to 23% over the same period. This shows that there is a great demand for new residential units in DFW, and this has attracted many developers into the market.

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INTERNATIONAL MARKET investments divided into small affordable fractional units, with every investor being a co-owner and co-developer, and with profits distributed annually, we cannot wait to see the outcome of this revolutionary property investment concept, and the bright future that Dallas-Fort Worth brings!

With this surge in demand, it is not surprising that home prices have appreciated significantly. According to the Case-Shiller ‘Home Price Index: Dallas’, homes in DFW have appreciated in price by 23% in the past three years (from July 2011 to July 2014). A recent online Housing Wire real estate article highlights an increase of 4.8% in median home prices in DFW this April, up from last year. But even so, DFW remains one of the more affordable housing markets in the US. Although prices are rising, there is no slowing of home sales. A Dallas metro listing is on the market for an average of 54 days, and this is a 12% decrease from last year. There is still a shortage of housing inventory in DFW, with an increase in competition for the same properties. The strong economy has attracted many developers into the market to bring more inventories to a market that desperately needs it.

Everything is coming up roses With such compelling factors, it is no wonder that A2A has a few residential developments in Tarrant County, DFW, the latest of which is right next to Alliance Texas. This latest project has proudly made A2A the third largest property developer in Dallas-Fort Worth. With its crowd sourcing concept for funding, and

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LEGAL By: Viknesh Ashley Clarence

W

hen buying property, it is best that investors simply do not plunge into a deal. There are some guidelines, strategies and steps that should be taken to avoid mistakes when purchasing a property, especially for the first time. In line with the book launching by renowned property speaker and real estate lawyer Chris Tan titled the “Wholly Book for Home Buyers: The 10 (Legal) Commandments In The Purchase Of Property”, PROPERTY INSIGHT takes a detailed look at some guidelines that can make a difference in the lives of home buyers.

THOU SHALT NOT HAVE NO OTHER DOUBT BEFORE SIGNING THE LEGAL DOCUMENTS

According to Tan, first and foremost, one must not have any doubts before signing legal documents when purchasing a desired property. To achieve this, one would have to carry out sufficient base work or due diligence. Tan states, “Always ensure that you know the type of property you are buying, and details about the property should be at the back of your hand, aside from knowing very well as to whom is selling the property to you. “The list of things that you should look into prior to signing legal documents can simply go on and on. However, always ensure that you get assistance from your lawyer, check the tiny details and read the fine prints,” Tan explains. He adds, “You should also ask questions if you aren’t sure. Fully understand each and every clause, never sign legal documents in a hurry, and most importantly understand that you don’t have to sign if you are unhappy with the clauses.”

THOU SHALT NOT MAKE CONDITIONS OF THE PROPERTY AT DELIVERY UNTO ASSUMPTIONS OF NORM The next commandment simply means to not accept a property as is during possession if it holds some defects, since these problems can be solved by the developer or previous property owner as agreed in the Sales and Purchase agreement. Some buyers chose not to worry about the specifications of the investments they make as long as they are able to tenant out the purchase they have made. However, if specifications do matter to you, get it in black and white. Chris explains, “If the condition of a property is

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LEGAL

10 COMMANDMENTS IN PROPERTY PURCHASE

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LEGAL important to you, you must state your requests to the previous homeowner or developer selling a particular property to you, and best do it in paper. This document should be included as part of the legal documents you sign upon purchase of the property.” Some examples of request normally made by a buyer could be to paint a property with a new coat of paint, to include a specified number of air-conditioners in a home, to include lighting in certain areas of a property and in some cases even to include brand new kitchen cabinets.

THOU SHALT NOT TAKE POSSESSION IN A RUSH The third commandment that Tan speaks about poses as a guideline to homebuyers as well as their right to hold a developer or homeowner responsible for any defects on a property upon possession. Basically what home owners can do here is simply to inspect their homes thoroughly during the delivery of vacant possession, followed by listing down defects that have been spotted down (if any), submitting these claims to the designated developer and finally ensuring that the property does in fact have a defect liability warranty. This can save owners from spending additional cash to repair defects caused prior to property possession, as well as avoiding any conflict that could arise between the developer and the buyer. The defect liability warranty usually lasts from 12 to 24 months from the date of completion that has been signed upon between the buyer and property seller and this assures that the buyer receives a property that is structurally pleasing and safe to live in.

THOU SHALT NOT COMMIT TO PURCHASE WITHOUT HAVE THE FUND IN PLACE Purchasing a property can be exciting for many. However, most do not realize how quickly cash would have to be paid as this can vary at different stages of property completion. When purchasing a property, several payments need to be made starting off with the property price and ABOUT THE CONTRIBUTOR

acquisition cost which include legal fee and stamp duty. “There are two common ways in which property buyers by property and this is via cash or loan,” tells Tan. He adds, “Being a cash buyer is straightforward. However, always understand when each progressive payment is due and always ensure that one has the required amount of cash to furnish these payments at every stage of the development. “Property purchasers must always understand that the loan price and purchase price of a property always has a differential sum. Prior to purchasing a property, it is best to calculate your monthly repayment to ensure that you can actually furnish these monthly payments that could at times get hefty.”

THOU SHALT NOT NEGLECT THY UTILITIES, UPKEEP, MANAGEMENT AND MAINTENANCE This commandment is vital and one that some homeowners may at times disregard. Tan urges homeowners to be responsible in maintaining the little things that can at times be disregarded but would prove to be very much important if the owner decides to someday sell the property. “Things that may sometimes be overlooked by home owners are monthly maintenance fees or service charges, sinking fund, quit rent, assessment, sewerage fee and electricity and water bills,” says Tan. These payments if ignored would only increase problems for the homeowner regardless if he or she lives in the property or not. If a property is tenanted, homeowners must brief tenants as to how much they may have to pay to furnish these bills. Ignoring these payments can cause tenancy issues as well as cause damage to the property. If one treads closely to these commandments delivered by Chris Tan, then buying, tenanting, managing and disposing off of properties could be an experience that homeowners should have very few issues with. To know more of Tan’s other commandments, and to dwell further upon his sermon in greater detail, eager readers may grab a copy of Tan’s book at nearby bookstores.

Chris Tan is the Founder and Managing Partner of Chur Associates, Advocates, & Solicitors. He is deeply involved in the real estate industry, having assisted Dato’ Alan Tong as the World President of FIABCI (International Real Estate Federation) in 2005/2006. Chris is now the Honorary Legal Advisor for FIABCI Asia Pacific Regional Secretariat on regional concerns. Chris was elected to serve FIABCI’s Malaysian Chapter for two terms, from 2006 to 2010, as its National Council Member, and in 2009, he was appointed to the Board of Directors of FIABCI International to preside over the portfolio of Young Members aged 35 and below for the term 2009/ 2010.

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INVESTOR NEXT DOOR

FINANCIAL FREEDOM Meticulous research and sub-sale strategies prove winning ways for a young property investor

By: Aidil Mohamad Noor

Y

oung Magdeline Lim, fresh from college graduation in 2010, first came to realisation that she needed to start an investment because she knew eventually she needed a safe and secure investment for when she retire and can no longer work. After some research, she discovered that property is the safest form of investment that had the longest leverage with the longest loan tenure. Her early strategy was buying to rent, she decided, because she needed to increase her income. “Property prices back then was still manageable, and the prices weren’t as scary as it is now. Then again, people are not so keen to invest in property as they are now,” Magdeline tells. Her first property was from a sub-sale market. “It was the safest form of property investment for

me as I could see and touch the property before purchasing it. Secondly, the market and amenities and infrastructures are all already there to assess the demand of the unit,” Magdeline explains. She then narrowed down her choice to Subang Perdana Goodyear Court 7. “I observed the area to understand the traffic flow and population density there. After a while, I found that the area has high traffic and high density population with offices and residential areas and shopping malls within 5km vicinity, and I thought this is a HOT area!” says Magdeline. After three months of conducting the research, she knew all the Subang Court units along with all the sizes, rental demand and even the market value. “I even knew what kind of families stayed at which type of courts,” she adds. With only RM7,000 for initial down payment and legal and valuation fees, she finally bought her first

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INVESTOR NEXT DOOR property from an agent who’s willing to sell one unit for 20% below market price. But she did not go and seal the deal alone; she went there with her team. With a contractor in her team, she could make a rough calculation on the repair costs needed and, with that as an argument, she managed to get the deal for much lower than the market price.

WHY NOT FOCUS ON COMMERCIAL PROPERTIES THAT CAN STILL GIVE US 80% MARGIN OF FINANCING? SOME SMARTER INVESTORS WHO HAVE A BIGGER PORTFOLIO CAN EASILY USE COMPANIES TO INVEST INTO COMMERCIAL PROPERTIES AND STILL LEVERAGE ON THE HIGHER MARGINS.

GOOD RENTAL YIELDS

Even now, her strategy is still the same: go for subsales. “For the past three years, I’ve been investing into sub-sale properties. As you know, there are two ways to make money from properties: buy to rent and buy to sell. All these while, in my 10 years, my aim is to increase my monthly income. Thus that’s why I chose to buy and rent out my units,” she explains. Most of her property portfolio consists of low- to medium-cost units. According to Magdeline, these types of properties generate the highest rental yields. All her units are giving her minimum of 9% rental yields. For her, the justifications for choosing sub-sales are as follows: • •

Since the property building is already up, she can see and feel and touch the properties, thus eliminating the odds of any possible half-completed projects. She can also use any defects in the units to negotiate for lower price. The demand and supply are all already existent, so it is easier for her to assess the demand for the unit she is buying. Moreover, most infrastructures would already be up and running, which draws the population to that area. She can study and narrow down the

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demographics of her potential buyers/renters since there are people already buying and/ or renting the unit. She would already know exactly what type of people would want to rent her properties – singles or family, locals or foreigners, students or working people. She would even have sufficient data to analyse the yearly trend from the last few years. Since she can safely project and asses the future developments as most of the infrastructure is already present, it is also useful for her in spotting the next area for potential growths, and the credibility of new development projects nearby.

For the past 2-3 years, however, Magdeline thinks that there has been too much supply of properties in the market at ridiculously high prices, and the developers were making this scenario worse off by offering easy entry to allow many buyers to easily buy a property that they financially cannot afford. “If you have noticed, most of those properties were those small ones like SOHOs, SOVOs, etc., all under the Commercial title to capture the investors who were facing the LTV 70%. So, in the next year or two, I’m expecting a rise in desperate sellers who finally feel the pinch of having to fork out high monthly instalments,” she adds. “First, if all those projects are finally completed, there would be an oversupply of properties for sale/ rent, and the owners will be facing a stiff competition to rent/sell out their units. Second, with the GST and the increased cost of living these days, it’s going to be much tougher to sustain such a high monthly instalments. And this is especially so for those who carelessly bought into more than two units at one go without considering this factor,” Magdeline explains. This shows how not many people are going into sub-sale market, which lessen her competition in


INVESTOR NEXT DOOR Magdeline Lim

smarter investors who have a bigger portfolio can easily use companies to invest into commercial properties and still leverage on the higher margins,” Magdeline adds. In public perception, commercial properties are expensive, yet investors can still get a commercial property that is less than RM300k in certain areas, according to Magdeline, and if investors are creative enough, they would know how to maximise that commercial space to maximise on the rental yields, provided that they do their own due diligence with proper research on the market demands and supplies. “So, buy low and rent out high = good money,” she concludes. As for 2015, her strategies will be as follows: •

purchase and rental transaction. “Continue to focus on this and soon one will lead to market dominance,” she adds. Also, small spaces being marketed at high prices per square feet are targeting potential buyers/renters earning above RM4, and this means not many are catering for the people who earn lower income range.

DUE DILIGENCE Magdeline advises that despite new rules and regulations to control Malaysian property prices, there will always be loopholes. So, she urges investors to talk to more bankers and seasoned investors who know the in-and-outs at the back of their hands, and learn from them. For example, she illustrates, while most people stop at buying properties just because of the LTV 70%, not many know that LTV is applicable for residential properties. “Hence, why not focus on commercial properties that can still give us 80% margin of financing? Some

• •

Remain looking into residential properties in the sub sale market since still not many looking into that area, yet; Keep buying to rent properties because it is still too expensive for many consumers to buy a property of their own; Always be on the lookout for desperate sellers by keeping tab of potential areas; and Last but not least, keep a much closer relationship with bankers and lawyers to share more tips on getting more loans to finance her property journey.

Magdeline now owns a number of properties, and currently she is one of the team members in Freemen, a company that started in 2009 with the objective of sharing the knowledge of investment, and has now become a community that invest together to make their financial lives a success. “Since I started investing, I’ve always been a fundamentalist, and I am proud to say that I am a prudent investor,” Magdeline says.

Magdeline (second from right) with the Freemen team

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TIPS

diy: Predicting

rate cycle

A

property cycle can be seen as a logical sequence of recurrent events reflected in demographic, economic and emotional factors that affect supply and demand for property, subsequently influencing the property market. Do not stress yourself! There are ways that you can predict the rate cycle to make your next investment a success.

The Share Market

The share market is haywire most of the time but is definitely worth watching in a general sense. If it trends upwards, and then continue to do so, this will ultimately tell us that the rate-cutting cycle is at, or near, its lows. Share markets are a good barometer of global and economic confidence to come – they do not tell us what is happening now but are usually a good guide of what is about to happen down the track.

Global Economic Conditions

If there is less bad news coming out of Europe

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and the United States, this can be a sign rate cuts will be fewer in the future. For an average Malaysian, keep an active eye on your nightly news flow, and note stories that talk of a continued housing recovery in the US and stronger growth coming out of China. When bad overseas news slows down, we know we are closer to the bottom with our rates.

Rising Commodity Prices

This is another guide that we are reaching a low point in interest rates. On the contrary, a drop in commodity prices can signal more rate cuts to come.

Auction Clearance Rates

Usually weekend auction clearance rates are reported in the media on Sundays or Mondays, and are worth keeping an eye on. Housing isn’t the guide for everything, but auctions can be a good indication of whether interest rate cuts are doing their job and homebuyers are re-entering the market.

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STRATEGY

HOW TO GET YOUR LOANS APPROVED By: Aidil Mohamad Noor

I

t is often believed that getting a loan for property investment is difficult nowadays with stringent requirements attached to the rising prices. Property Insight sat down with property investor and CEO of SkyBridge International Adrian Un, seasoned investor and co-founder of the Community of Real Estate Investors (CORE)

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Rachel Lim and loan expert Gary Chua to find out if this is really the case.

How difficult is it now to get your loans approved compared to three years ago? Adrian Un: The banks are still granting loans to house buyers. It has never been a challenge for genuine purchasers to get their loan approved.

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STRATEGY Un: Pay off your first loan, so you can buy the next property back at higher DSR

properties in one or two years, they are considered as a high risk loaners. Rachel Lim: My point of view is from the point of view of an investor. I would rather say that the banks are more cautious, rather than saying it is difficult to get loans. In a way, the banks have raised their bar in the qualifications and are now categorising their loaners. Those who can comply with the documents and requirements can also easily get their loans approved, in a way that the banks see them clients who know the rule already. So in my perspective, I don’t think that it is hard to get the loans.

The group that are affected the most are the first home buyers, mostly consisting of Gen-Y’s and there are report saying that 70% of loan applications under first time homebuyers are being rejected, why is this so?

Those who have it hard are the ones who have purchased a lot and have built up leverage of their own. Banks are more lenient nowadays compared to the past. Banks even allow up to 150% debt service ratio, so if you asked me if it’s difficult to get loans nowadays, I wouldn’t say that it is entirely true. It’s just that Malaysians nowadays are typically buying more than one property at one time, within a year. For the banks, those who accumulate a lot of

Adrian Un: Imagine yourself as a graduate who just found your first job. You don’t have credit cards, you don’t have any loans at all, and your Central Credit Reference Information System (CCRIS) is totally clean. Bank will most probably reject your loan. Why? Because there are no records on your repayment behaviour and that makes the bank cautious. Even if you are working with a salary of RM5,000 monthly, your loan will probably be rejected, unless you work for a multinational company. Also, to bring up the lifestyle of these Gen-Y, they are big spenders and even if they’re not, the cost of living is so high and some of them use credit cards. And when they do, their credit cards normally maxed out

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STRATEGY and this turns up in CCRIS. Now that the banks see that, they won’t be so keen anymore. Rachel Lim: I do agree with Adrian. CCRIS is very important in term where the bank can observe your behaviour in repayment. If you have neither loans nor credit cards, they can’t trace it. And nowadays the markets have moved very fast. Another thing is that some of the people never bothered to pay their income tax. That can also affect since the bank doesn’t like those who can’t comply with what they want. And to add it up, these homebuyers don’t really know about the loans policy. Gary Chua: There are two key points from this, and the first one is their income. They might be earning lower income like below RM5,000. And then their Debt Service Ratio (DSR) is at 60% which is lower than the masses at 70% to 80%. In fact, DSR rejection case is at 75%. The second reason is, again, your CCRIS. Clean CCRIS doesn’t mean your record is good. If you walk into a bank with a clean CCRIS, even with a high income, you will find that most banks offers you loan only up to 80% margin, even when you still have the 90% margin quota with you. CCRIS is a very important key point and, yes, you probably need to have credit cards as to give your CCRIS a record. But you really need to watch your behaviour in repayment and keep a good record with prompt payment in your CCRIS.

What can we do to please the credit approving officer?

Rachel Lim: First thing first, let’s rewind back to the process of loan submission. You will not be seeing the loan approving officer himself, but you’ll be dealing with the banker responsible for you on that day, meaning that there’s a middle person in between you and the officer. So it’s not a direct interaction, which means you can’t please him or

Lim: Refinance your property under a company, in which you can move 60% of your loan into the company

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her. Then here’s my advice: When submitting the documents, you might want to ensure good and complete documents so that the banker doesn’t have to do much with it. This will ensure that the documents go to the hand of the officer in an instant, without any second check by the banker. In certain cases where the loan is not approved the first time but is approved the second time, it might be that the banker handling the documents is the one that gives trouble in the first instance, and the second time it might be a different banker.

If I’m at my third property, and my loan eligibility is only up to 70%, what can I do about it?

Adrian Un: I’ll give you three strategies. Number one: guarantor scheme. The only condition is that, for example, you are a husband and you have two properties, while your wife has only got one. Your income is high compared to your wife and you want to buy a property with 90% loan. What you can do is that sign the purchase agreement under your wife’s name. Now your wife can purchase the house, and you can become the guarantor, and since your wife only has one property, you’ll get the 90% loan, no question asked. Strategy number two: third party loan. In a same situation, husband and wife can sign under the wife’s name, given that she qualifies for a loan. And strategy number three is that sometimes, if you have two housing loans, you can pay off one of the housing loans. Say that you only have the remaining loan of about RM100,000 for one of the properties, and you have enough money to pay it off since the down payment for the next property matches the remaining balance. Why not pay off the [first] loan, so you can buy the next property back at 90%?

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STRATEGY

Rachel Lim: First thing first, you need to know what you’re doing if you want more than two properties. Bank Negara impose the ruling of 70% loan for the third property because they want to make sure that there are no overheads in property owning, so you need to know what you’re doing. And for me, it’s just as Adrian said, you need to monitor your other two properties’ loan movements. If you can pay off one of the property first before buying the third one, then you can get the 90% loan. Take your financing responsibly. A banker also taught me that you can refinance your property under a company, in which you can move 60% of your loan into the company. This way, you can get your personal loan back to 90%. Gary Chua: I totally agree with Rachel, if you take your financing responsively and only buy

Chua: keep a good record with prompt payment in your CCRIS

Clean CCRIS doesn’t mean your record is good. If you walk into a bank with a clean CCRIS, even with a high income, you will find that most banks offers you loan only up to 80% margin, even when you still have the 90% margin quota with you. – Chua when you can afford it. So now I’ll summarise the two loan-sharing [strategies]. There are two main strategies to use and number one is using third party loan. Certain banks have different practices and there are banks that will allow you to be a guarantor which in SPA there can be two person’s name and you can be the guarantor even though the guarantor doesn’t have his 90% quota anymore. Another way to do this third party strategy is that you can join with your relatives. And the third one is that there are certain banks that allow a joint loan with friends. So you can have a joint loan with your friend who still has the 90% quota and the loan will be under his or her name while you are the guarantor. The second strategy is really moving alone into a company, like what Rachel pointed out previously. To me, these are the two strategies that can you use and broaden it up into many more strategies of your own.

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FINANCE

MANAGE IT WELL!

F

inancial management has never been more important today, especially when home affordability is a major issue. Agensi Kaunseling Dan Pengurusan Kredit (AKPK) shares some tips.

Savings • Using up own savings at an alarming rate • Having little or no savings to handle unexpected expenses

A condition where an individual cannot meet or has difficulty paying off his financial obligations to his creditors.

Expenses • Living from paycheck to paycheck • Depending on part-time jobs, overtime, commissions • Arguing with spouse regularly about money

Signs of Financial Difficulties

How to Manage your Debt

Credit Cards • Paying only the minimum amount each month • Increasing the outstanding balance every month • Going over the credit limit • Taking frequent cash advances

Determine your Goals Write down your major financial goals. These may include paying down debt or saving for a house or your children’s university tuition. Next, write down the expected total cost and time frame. Divide the cost by the total number of months. This is how much you’ll need to set aside each month to reach your goals. (If the set-asides seem too big, you may want to extend your time frame.) To reach your goals, you’ll need to set aside a certain amount each month. One good method for doing this is to set aside your goal money first, then cut back spending accordingly. How much spending will you need to cut? Where will you cut? Or how much additional income, if any, will you need to earn

Definition of ‘Financial Distress’

Loans • Using overdraft on your current account frequently • Receiving notices from banks or creditors for non-payment • Being denied credit because of a negative credit report • Borrowing money from family or friends • Getting calls from debt collectors regularly

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FINANCE each month? The best way to answer these questions is to do a budget. Look at the Numbers Now that you have determined your goals and the money you’ll need to set aside each month to meet them, as well as your monthly take-home income, you can calculate the absolute maximum that you can afford to spend. Plan Your Monthly Spending This is where the magic happens. Once you begin to see your financial picture more clearly, you’ll begin to discover new and exciting solutions. Stay on Track (By Following Your Budget) Once you’ve made a budget, write down your spending each month to see if you’re on track. If you accidentally go over budget in one area, don’t panic. Instead, try to cut back in other areas so you can still come out on target. Some of the money in your budget won’t actually be spent every month. This includes money you’ve budgeted for future car repairs, house repairs, insurance, property taxes and medical and dental bills. Don’t spend it. When those big bills finally arrive, you won’t be caught short. Estimate Your Future Spending Once you know how much you spend, you can use this information to estimate your monthly expenses. First, put in your fixed bills, such as your monthly mortgage

payment or rent, car payment and all loan and credit card payments. Then fill in the rest, estimating as best as you can. Make sure you include all the hidden costs of driving a car (insurance, petrol, repairs) and owning a home (maintenance, repairs). Even if you don’t have to make an insurance payment next month, include one-twelfth of your yearly insurance bills. When planning your budget, be realistic about spending items. The more accurate you are, the better you’ll see the current state of your finances and the better you’ll be able to make decisions. Total Your Spending, and Compare If your total monthly spending is more than your maximum spending limit, go back and look for areas to trim. Keep cutting until your monthly spending falls below the maximum, so there is money left over. Set up an Emergency Fund What you do with the small amount you have left over at the end of each month will have an enormous impact on your finances. This is the only money, other than the amount you’ve set aside for your goal, that you can use to improve your financial situation. Consider using this money to improve your financial situation by paying down your credit card and loan balances, or setting it aside for an emergency fund. Some of the money in your budget won’t actually be spent every month. This includes money you’ve budgeted for future car repairs, house repairs, insurance, property taxes and medical and dental bills. Don’t spend it. When those big bills finally arrive, you won’t be caught short.

About the Contributor

Agensi Kaunseling Dan Pengurusan Kredit (AKPK), is a wholly owned subsidiary of Bank Negara Malaysia. Its inception stemmed from the need to ensure that the public is able to manage their finances prudently. AKPK’s primary role is to educate people from all levels of income to ensure all Malaysians are equipped with sound personal financial management skills. For more information, downloaded a guide http://www.akpk.org.my/ services/debt-management/self-help-guide , log on to www.akpk.org.my or call the toll free number 1-800-88-2575.

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STRATEGY

PROTECTING YOUR OVERSEAS ASSETS Same value properties located in different continents are subjected to different laws. So how does one protect overseas assets? Kevin Neoh explains.

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STRATEGY

T

hanks to technology, we now live in a world that is becoming more and more connected. Access to information and updates of other countries are so easy via the Internet. It has become ‘normal’ for visionary property investors to spread their purchases all over the globe. In fact, we can easily find advertisement or receive email touting attractive deals in a city such as London or be introduced to deals in country such as China via property investment clubs. Of course, when an investor invests in these assets they are often driven by the potential higher returns and appreciation. But when doing so overseas, it is crucial not to forget to protect your properties there too.

Different Jurisdiction Different Law We tend to take things for granted, so much so that we would have a blind-spot of presuming that the laws and taxes are more or less the same. Many Malaysians kick-started their foreign adventures without even knowing what will affect them. One such drastic difference is perhaps the presence of estate tax or inheritance tax. If you have assets in a country such as the USA, your estate (USsituated asset) may be subjected to two levels of estate taxes, ie. Federal and State level. Estate tax is a form of tax levied on the taxable estate, which means after making certain adjustment onto the gross estate value such as deducting funeral expenses, charitable donations etc. It can rack up to as high as 40% of excess of USD$5 mil (RM16.7m) for residents and USD$60,000 for non-resident (Federal level). Granted, having the opportunity to venture outside of Malaysia to invest in anticipation of potential better return is attractive to many of us, but if it is not done right, the resulting consequences could

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STRATEGY make our initial objective pointless and sometimes come at the expense of our assets values being depreciated.

A case study : One of my client, Mr Y(not his real name) experienced a great loss when his brother passed away. His brother was a Malaysian (let’s call him Mr X) who started staying in Singapore ten years prior to his demise. Mr X had accumulated his wealth both in Singapore and Malaysia and had left behind a self-drafted Will which he wrote six years before his death. The contents had never been reviewed nor changed. In it Mr X had also appointed their younger sister who resides in Johor Bahru (JB) to become the executor because he had thought that since JB is close to Singapore, it would be easy for the sister to execute the instructions. But upon Mr X’s sudden demise, the sister had refused to become the executor because she was only a housewife and not able to commute to Singapore to settle the matter. Also, Mr X had overlook to leave behind a list of his assets and liabilities. This responsibility was passed to Mr Y, who had to first identify what and where the assets were, and then to write in to every bank and investment banks as well as insurance company asset management companies to verify if his brother had maintained any account with them. This process took Mr Y many months, plus several trips to Singapore. To avoid leaving our beneficiaries in such a mess and engaged in legal battle over who should inherit those foreign assets, there are some options to consider in ensuring our foreign assets are protected from the two things that are inevitable in life - Death and Taxes.

Making a Will We have to understand that not every Will is executable. Like the case of Mr X, the Will left behind was valid but it was poorly planned. Firstly, the most important decision about writing a Will is not about the instructions, but who the executor should be. Now, there are cases where an executor could die before the testator. Hence it is advisable to review the Will from time to time. Another point to note is that we should have multiple Wills separating our Malaysian assets and those overseas because they are subject to different jurisdictions, especially when immovable assets such as properties are involved. This will save precious time for beneficiaries and

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executors as they can execute concurrently other than having to wait or decide about where to apply for Grant of Probate first (Original Will is needed to apply for Probate). As such, having separate Wills can make the whole process to be easier and more cost effective.

Setting up a Trust or Foundation Trust or Foundation is a recommended solution if we have a sizeable asset that we want to leave to beneficiaries. The requirement of applying for grant of probate is not applicable as the transfer of assets into the Trust will have to occur prior to death of the settlor or founder. Indeed, Trust or Foundation is a solution for investor who need a higher level of planning as compared to the use of Will as the latter mainly dictates intention on distribution of assets. Trusts also care for preserving it beyond the event of death. A Trust or Foundation can be maintained for more than few generations, and some can be perpetual provided that the funds and asset size are big enough. This can ensure succession for future

Distance and proximity should not influence a decision when selecting an executor. Find someone trustworthy who is capable of executing the Will.

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STRATEGY for investor situation, which is unique in its own way. It is highly advisable to use a minimum yardstick of RM1 million in order to justify the use of such a planning vehicle as there will be fees involved.

Insurance Wrap Account

generations and also allow the settlor to still have control over how the beneficiaries can receive from the Trust or Foundation as there will be a Trust deed or Foundation Charter that contains the wishes of the settlor. We can also use Trust or Foundation to achieve tax optimisation as some country will levy huge estate tax onto the inheritance, but for an offshore Trust to payout ‘income’ to beneficiaries, the ‘income’ is not subjected to inheritance tax and also personal income tax, thus enable savings and optimisation. The use of Trust and Foundation allows the settlor or founder to ring-fence his assets so that they are protected from creditor or party claiming an interest on his estate. Many think Trust and Foundation are similar. They are not. Legally, a Trust is not a legal entity and therefore its validity may be challenged at the very defining moment, whereas a Foundation is a registered legal entity and owns the properties registered under it while a Trust hold those properties on trust for the beneficiaries only. In deciding the use of Trust or Foundation, it depends on the real intention and nature of solution needed

An easier way to protect our paper assets overseas would be the use of a life insurance wrapper. This is an open-architecture account whereby investors can put in any form of liquid assets such as equities (stocks traded in listed exchange), bonds, mutual funds, bank deposits, ETFs, and even currencies into the account. This life insurance wrapper allows investors to trade and buy stocks directly from major exchange such as the New York Stock Exchange, Tokyo Stock Exchange, and buy funds from renowned companies such as JP Morgan, BlackRock and Fidelity etc. Life insurance wrapper account can only be done via Licensed Financial Planner and the account will be registered in tax havens such as Isle of Man, Cayman Island, Bahamas, Panama, etc. This allows protection from tax leakage as all investment returns are tax-free. When we open a Life insurance Wrapper account, we will be able to nominate beneficiary(es), thus allowing smooth transfer of the assets when death occur as well as having protection from tax. As a guideline, you can consider using this route if you have a minimum of RM350,000 and would like to diversify into international investment. When you engage a professional financial planner to help you construct your estate plan, you will also be guided on how to create a comprehensive and holistic estate plan that will cater to and address your concerns.

About the Contributor Kevin K.M. Neoh RFP, MBA is a Licensed Financial Planner who is licensed by the Securities Commissions Malaysia and Bank Negara Malaysia. He believes that families of all income levels should have access to professional financial planning assistance and that the financial world is too complex to shoulder alone. He actively seeks to assist people on the street to live a financially confident life. He is a financial planner at VKA Wealth Planners Sdn. Bhd. Kevin can be contacted at kevinneoh@vka.com.my.

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